Business Cycle Fluctuations in Mediterranean Countries (1960-2000)

Abstract

This paper examines business cycle characteristics of Mediterranean countries using a set of macroeconomic aggregates (GDP and demand components, money, and prices) for fifteen Mediterranean countries over the 1960-2000 period. We analyze the main properties of business cycle fluctuations (persistence, volatility, asymmetry, and synchronization) and suggest that there are various regularities in the characteristics of business cycles of countries that are similar in their stage of development and/or geographical contiguity. Moreover, we investigate if comovements in aggregate time series are robust; that is, if they are common to various countries belonging to different economic levels of development, but that are geographically contiguous and with economic and historical linkages. We find similarities in terms of comovements and periodicity with respect to the GDP for consumption and investment among the aggregate demand components and, to a lesser degree, the price level and the inflation rate. On the other hand, differences among developed and developing countries of the Mediterranean region emerge, as both trade balance and policy variables are procyclical in many developing countries. Such findings may reflect the characteristics of policy making in developing countries and those countries' dependence on world demand in international trade.