Business cycle synchronization of CEECs with the Euro area: a regime switching approach

Abstract:
This article investigates the possible business cycle linkages between CEECs (Central and Eastern European countries) that were candidates to enter the EMU and the euro area for the period 1993 to 2014. We analyse business cycle (a)symmetries for these countries by using Markov switching autoregressive models and synchronization tests.
By analysing the correlations between the cyclical fluctuations for these countries, we examine the existence of common features between the individual cycles. By distinguishing between different regimes, we show that the indications of business cycle synchronization are quite high in the recession regime, but lower in the normal and high growth regimes, with the exceptions of Hungary and Poland.

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