Government fiscal health is intrinsically linked to the cyclic regularity of national economic activity. However, fiscal management can be stabilized if the underlying governance framework maintains consistency in economic and social policy implementation. This study analyses the fiscal management of the South Korean government with a specific focus on the composite index of business indicators. The research explores the important role of strategic policy alignment in maintaining fiscal sustainability, evaluating production activity performance in the context of national finance. The study utilizes longitudinal trends from South Korea to assess how fiscal management adapts to business cycle indicators. Findings suggest that proactive and consistent policy governance reduces the need for disruptive fiscal adjustments during economic downturns. The research provides actionable insights for policymakers regarding the integration of business cycle signals into long-term national financial governance.© The Author(s) 2026. Published by RITHA Publishing. This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited maintaining attribution to the author(s) and the title of the work, journal citation and URL DOI.Article’s history: Received 10th of January, 2026; Revised 27th of January, 2026; Accepted for publication 10th of February, 2026; Available online: 15th of February, 2026; Published as article in Volume II, Issue 1(3), 2026.

How Phillips curve dynamics enhance business cycle synchronization analysis in Central and Eastern Europe

This study evaluates whether the Eurozone fulfills the theoretical requirements of an Optimal Currency Area (OCA) through a visual and comparative analysis. The Eurozone is a monetary union of 20 European countries sharing a single currency, the euro, without full political and fiscal integration. OCA theory provides a framework to assess whether countries can effectively operate under one monetary policy without creating macroeconomic imbalances. The four core OCA criteria examined are trade integration, labor mobility, business cycle synchronization, and fiscal coordination. The study analyzes Eurostat data from six representative member states: Germany, Austria, and the Netherlands (core economies), as well as Greece, Portugal, and Spain (peripheral economies). Key indicators include harmonized inflation (HICP), unemployment rates, and GDP per capita. The findings suggest that although trade and capital integration have progressed, especially among core countries, significant disparities persist in the Eurozone's labor markets, price trends, and economic performance. Business cycle synchronization remains incomplete, which complicates the implementation of a unified monetary policy. Moreover, the absence of a centralized fiscal mechanism limits the Eurozone’s capacity to mitigate asymmetric shocks. Unlike the United States, the EU lacks automatic fiscal transfers across regions, resulting in slower and less effective responses to economic downturns and recessions. The study concludes that the Eurozone qualifies only as a partially optimal currency area. To enhance its functionality, credibility, and resilience, the paper recommends deeper fiscal integration, improved labor mobility, stronger institutional coordination, and targeted support for peripheral countries. Without such reforms, the Eurozone remains vulnerable to cyclical divergence, economic fragmentation, and long-term structural imbalances.

Purpose: This study analyzes the effects of monetary integration through intra-regional trade on the synchronisation of economic cycles in the CEMAC. Methodology: This study applies a panel data model with specific effects to five of the six countries that make up the Central African Economic and Monetary Community: Cameroon, Congo, Chad, the Central African Republic, and Gabon. The data used come from two sources: The World Development Indicators (WDI) for the analysis of business cycle synchronization, and the UN Comtrade database for bilateral trade data, over a time horizon ranging from 1982 to 2018. Findings: the findings suggest that, economic and monetary integration within the CEMAC framework has not been accompanied by a synchronization of business cycles. Unique contribution to theory, practice and policy: From a theoretical perspective, the study of economic integration dynamics and cycle synchronization in CEMAC provides a new perspective by combining several economic theories. Rather than strictly applying Mundell's classical theory, this study adopts a more flexible approach that integrates endogenous criteria specific to African economies. From a political perspective, this topic highlights innovative reforms to improve economic integration in CEMAC, and provides an original approach proposing better coordination between CEMAC institutions and the BEAC for the harmonization of monetary and fiscal policies. From a practical perspective, it proposes the development of transnational infrastructure, likely to promote better connectivity between member countries, which could strengthen trade and improve the synchronization of economic cycles.

This study examines business cycle dynamics and synchronization among the ASEAN-10 countries, focusing on how trade and financial linkages influence economic co-movement. We employ the mixed-frequency dynamic factor model to address the challenge of varying data frequencies across these economies. We then construct synchronization indices using conventional rolling correlations and a novel time-varying parameter approach. Our analysis reveals several key findings. First, business cycle synchronization in ASEAN strengthens during regional and global recessions. Second, while increased exports to China promote synchronization of ASEAN business cycles, the effects of exporting to the U.S. and EU are more complex. Exports to the U.S. are positively associated with synchronization in some model specifications, whereas the influence of exports to the EU appears weak and often insignificant. Finally, we find limited empirical evidence of a relationship between foreign direct investment (FDI) and business cycle synchronization in ASEAN.

ABSTRACT This study has a dual purpose: firstly, to evaluate the impact of sub-national business cycle synchronisation on amplitude in four inflation-targeting emerging market economies (Brazil, Colombia, South Korea and Mexico). Secondly, we explore spatial dependence in sub-national business cycles. Using the Arellano and Bond (1991) estimator, we determined synchronisation's role in sub-national cycle amplitude. Results show increased synchronisation enhances amplitude in both expansion and recession phases across all economies, notably more in South Korea. Greater synchronisation not only amplifies a region's business cycles but also influences neighbouring regions, evident in both expansion and recession phases across all four economies.

Structural dependencies in African economies: business cycle synchronization and spillover effects

ABSTRACTThis analysis utilizes data from February 2000 to December 2023 to investigate Tunisia's growth and the synchronization of its classical cycle with Morocco and Algeria. A Markov‐Switching Bayesian Vector Autoregression (MS‐BVAR) model‐based advanced econometric approach is employed to investigate the alignment of economic dynamics and regional cooperation. MS‐BVAR analyzes regime changes and cyclical co‐movements. The study also examines the impact of trade integration, macroeconomic policy, and institutions on the business cycle synchronization of three Arab Maghreb Union (AMU) countries. The analysis clarifies these secondary objectives to enhance knowledge of economic convergence mechanisms and prevent the dispersion of the study framework. This method links methodology to expected findings, ensuring consistency in interpreting regional economic dynamics. The growth and economic cycles of the AMU countries have shifted. This highlights the structural differences in their economies. Although the AMU exists despite asymmetric shocks, experience demonstrates that such inequalities hinder policy efficacy. Fiscal transfers and coordination are needed to correct structural divergences. North Africa can cooperate, but misaligned economic cycles can cause policy mismatches. Better synchronization reduces costly modifications and makes policy more predictable, improving cooperation. Instead of ruling out collaboration, the study emphasizes adaptive policies that overcome asymmetries.

This study empirically assesses the degree of business cycles synchronization and economic integration between Laos and China under the influence of the Belt and Road Initiative. We estimate a two-country structural VAR model and apply sign restrictions to identify the structural shocks for 1984-2022. We find that China’s macroeconomic shocks have played a significant role in shaping Laos’ GDP and price level and that China’s influence is increasing over time. Our results suggest that Laos’ business cycles have become more synchronized with China’s under the influence of the BRI, consistent with the overall literature of BRI’s impact on the developing countries.

Openness and the effect of business cycle synchronization on the equity risk premium

This paper estimates the role of six shocks originating in the United States in driving the international business cycle. To this end, it employs impulse response functions and forecast error variance decomposition from panel local projections. We find that key macroeconomic shocks originating in the United States contribute significantly to business cycle synchronization between the US and other economies. These shocks also account for a substantial part of output fluctuations in these economies. Considering individual shock contributions, we document that technology and monetary policy innovations are of the highest relevance.

<p class="MsoNormal" style="margin-top: 12.0pt;"><span lang="EN-US" style="mso-bidi-font-size: 10.5pt; font-family: 'Cambria',serif; mso-fareast-font-family: 宋体; mso-bidi-font-family: 'Times New Roman';">Following the seminal paper on Optimum Currency Areas (OCA) by Mundell (1961) a wealth of literature has been published on the business cycles synchronisation and its main determinants. This work provides a systematic review of this research field both at country-level synchronization and regional level. The paper aims to evaluate the contribution of the related literature’s methodologies to the measurement of the business cycle and the estimation of the level of synchronization. The discussion of the collected papers is expected to substantially assist researchers, practitioners, and policy makers keen to employ themselves in the area of business cycles synchronisation. </span></p>

Abstract This research analyses the threshold effects of fiscal policy on business cycle synchronisation in the Economic Community of West African States (ECOWAS). The main contribution is the analysis of the effects of respecting versus not respecting deficit and debt thresholds on the synchronisation of business cycles through the creation of binary variables. The study covers the period 1990–2020 and fourteen ECOWAS countries. The results show that the optimal pro-growth thresholds for the budget deficit and debt are 5.559% and 45.61% of GDP, respectively. Furthermore, spatial analysis reveals significant positive spatial spillover effects of respecting these thresholds on synchronising business cycles within ECOWAS. The current convergence criterion of −3% for the budget balance is favourable for growth and business cycle convergence. In addition, the current debt convergence criterion of 70% of GDP could be adjusted. Our results suggest the need to strengthen revenue mobilisation, harmonise taxation and improve the monitoring of fiscal standards.

Synchronization of endogenous business cycles

PurposeThis purpose of this study aims to critically evaluate the feasibility of establishing a single currency area within the South Asian Association for Regional Cooperation (SAARC) by examining the economic integration of its member states. The analysis focuses on the extent to which the region meets the criteria of the optimum currency area (OCA) theory, particularly in terms of business cycle synchronization, labor mobility and capital flows.Design/methodology/approachUsing a vector autoregression (VAR) model within the aggregate demand-aggregate supply framework, this research investigates the symmetry of supply and demand shocks across SAARC economies. The study analyzes the synchronization of business cycles and the mobility of labor and capital to determine the readiness of SAARC for a unified currency.FindingsThe results indicate significant asymmetries in business cycles among SAARC countries, with substantial disparities in economic responses to shocks. These findings suggest that the region lacks the necessary economic synchronization required for a successful single currency area. Limited labor and capital mobility further complicate the potential for economic integration within SAARC.Research limitations/implicationsThe study is constrained by data inconsistencies and the limited range of economic indicators available for SAARC countries. Future research should expand the analysis to include a broader set of socioeconomic factors and more comprehensive data sets to better assess the region’s potential for monetary integration.Practical implicationsThe study highlights the challenges of forming a currency union in South Asia due to economic disparities and limited mobility. However, gradual steps toward deeper regional integration, improved financial infrastructure and enhanced cross-border collaboration could foster long-term economic stability, growth and social cohesion in the SAARC region.Social implicationsThe research highlights the potential social benefits of enhanced economic integration, such as increased community resilience and social cohesion, while also warning of the risks associated with premature monetary union in a region with significant economic disparities.Originality/valueThis study provides a detailed analysis linking the theoretical framework of the OCA to the practical realities of economic integration in South Asia. By focusing on the specific economic conditions of SAARC member states, the research offers valuable insights for policymakers considering regional monetary integration.

This study investigates the transmission and the business cycle implications of Chinese export shocks to other Asian economies. Based on a panel vector autoregression (PVAR) model, we provide evidence that a positive export shock originating from China simultaneously stimulates aggregate demands for both China and other Asian economies. The PVAR model takes into account three main sources of potential interactions among ten Asian economies. Simulations from a two-country DSGE model featuring endogenous trade links suggest that positive trade spillover is essential to explain the macroeconomic comovement pattern. Our findings further indicate the importance of the Chinese economy to business cycle synchronization.

The creation of a common European currency has been scrutinized in the context of optimum currency area theory since its origin in Mundell (1961). The debate gained particular prominence in light of the endogeneity hypothesis (Frankel and Rose 1998), which argues that once two countries establish a common currency, their economic structures and cycles increasingly align due to strengthening intra-industry trade. By contrast, the specialization hypothesis (Eichengreen 1992; Krugman and Venables 1996) argues that the creation of a currency union will predominantly increase inter-industry trade, ultimately lowering business cycle correlation. To test these views, we establish several indices of bilateral trade intensity across EU members using input–output data, measuring gross and so-called value-added trade, which also considers the contribution of intermediary goods in the production of final exports. The results of the fixed effect panel data framework indicate a strong and robust empirical relationship between growth correlations and intra-industry trade, much in line with both Mundell’s and Frankel and Rose’s theories. However, we cannot establish a similarly robust relationship between total trade intensity and growth correlations. We reconcile these results by identifying a statistically significant relationship between economic alignment and trade when only considering industrial production, highlighting the importance of pan-European industrial supply chains for European economic integration. Rerunning our regression framework on the subsample of the eurozone indicates that the common currency area displayed even stronger properties of an optimum currency area than the entire European Union.

This article examines the effects of monetary integration on the synchronization of the business cycle within ECOWAS (Economic Community of West African States) and contributes to the economic literature dealing with these aspects. First, the indicators of de facto and de jure central bank independence are considered to examine the role of central bank independence in the relationship between monetary integration and business cycle synchronization. Second, the ARDL error correction estimator is used to analyze both short- and long-run relationships and to address potential problems related to endogenous variables. Using panel data covering 105 country pairs from 1990 to 2020, the estimation results show a positive and statistically significant effect of monetary integration on the long-run synchronization of the business cycle. Regarding short-term synchronization, the conclusions are mixed. Overall, this study argues for the implementation of economic policy measures aimed, among other things, at complying with convergence criteria, strengthening trade agreements, and ensuring the independence of the central bank of the future monetary union. This article demonstrates that monetary integration promotes long-term business cycle synchronization within ECOWAS, highlighting the importance of central bank independence. Using panel data and an ARDL method, it reveals significant effects of this integration while noting mixed results in the short term. The findings advocate for economic policies focused on convergence criteria, strengthened trade agreements, and central bank independence to enhance regional stability.

PurposeThis paper aims to examine the impact of intra-industry trade on business cycle synchronization within the Economic Community of West African States (ECOWAS). ECOWAS region is characterized by limited intracommunity trade and a low level of foreign direct investment.Design/methodology/approachFirst, this research uses the two-digit level harmonized system classification to measure intra-industry trade, which is straightforward to interpret and compute, making it suitable for countries with low trade intensity. Second, it uses the system generalized method of moments (system-GMM) to examine the dynamic relationship between variables and address endogeneity concerns.FindingsThe results obtained from the system-GMM estimation reveal a positive and significant correlation between intra-industry trade intensity and business cycle synchronization, as well as an inhibiting effect of economic freedom on the relationship between intra-industry trade and business cycle synchronization. These results highlight the need to implement policies aimed at reducing tariff barriers, improving financial integration and intensifying production.Originality/valueThis research analyze the link between intra-industry trade and business cycle synchronization within the ECOWAS. It also analyze the role of economic freedom on the link between intra-industry trade and business cycle synchronization.

Business cycle synchronization and asymmetry in the European Union