Business cycles and macroeconomic asymmetries: New evidence from Eurozone and European countries

Abstract

AbstractThis paper focuses on the synchronization of business cycles among European Union countries. The co‐movements of economic growth and foreign direct investments are examined for the EU Three different periods of business cycles are compared and three sub‐groups for the sample and the whole period are constructed, a core and a periphery group as in Campos and Macchiarell, Economics Letters, 2016, 147, 127–130, and a new entry group. To assess the robustness of the results, the business cycles were estimated by using the Hodrick–Prescott, Journal of Money, Credit, and Banking, 1997, 29, 1–16 filter, the Corbae–Ouliaris, Econometric Theory and Practice: Frontiers of Analysis and Applied Research, 2006 filter and the Hamilton, The Review of Economics and Statistics, 2017, 100, 831–843 filter. Moreover, the Wald test of asymmetries is used to measure the strength of business cycles. By using the asymmetry results, we construct three new groups of countries. This research contributes to the literature by providing to policymakers a deeper understanding of business cycle synchronizations and the possible asymmetries they have among the EU.