Article: Business cycle regimes in a group of South East European Economies. Evidence from a threshold SUR approach Journal: International Journal of Economic Policy in Emerging Economies (IJEPEE) 2012 Vol.5 No.3 pp.272 - 292 Abstract: This study investigates the degree of economic integration that the group of selected South East European countries have achieved with the euro area. The evidence of this study suggests that all four selected South East European economies are in sync with the euro area cycle, and respectively form a homogenous group of countries. Still, as it was expected, higher implied growth rates are found in countries where greater internationalisation of enterprises and greater product and financial sector linkages to European Union (EU) markets are present. In addition, the overall findings of these countries' business cycle synchronisation with the euro area say nothing about the desirability of these countries adopting an early peg against the Euro and joining the Eurozone, but they do raise questions of the feasibility of doing so. With respect to the patterns in business cycle co-movement before and after the beginning of the global financial crisis this study clearly shows that synchronisation of business cycles is particularly strong during the downturn, i.e., up to mid-2009. Conversely, a decline in the synchronisation is observed in the early recovery phase after a recession. Inderscience Publishers - linking academia, business and industry through research

Title: Business cycle regimes in a group of South East European Economies. Evidence from a threshold SUR approach

Authors: Magdalena Petrovska

Addresses: National Bank of the Republic of Macedonia Kuzman Josifovski Pitu Blvd. 1, 1000 Skopje, Republic of Macedonia

Abstract: This study investigates the degree of economic integration that the group of selected South East European countries have achieved with the euro area. The evidence of this study suggests that all four selected South East European economies are in sync with the euro area cycle, and respectively form a homogenous group of countries. Still, as it was expected, higher implied growth rates are found in countries where greater internationalisation of enterprises and greater product and financial sector linkages to European Union (EU) markets are present. In addition, the overall findings of these countries' business cycle synchronisation with the euro area say nothing about the desirability of these countries adopting an early peg against the Euro and joining the Eurozone, but they do raise questions of the feasibility of doing so. With respect to the patterns in business cycle co-movement before and after the beginning of the global financial crisis this study clearly shows that synchronisation of business cycles is particularly strong during the downturn, i.e., up to mid-2009. Conversely, a decline in the synchronisation is observed in the early recovery phase after a recession.

Keywords: optimal currency area; OCA; threshold seemingly unrelated regressions; TSUR; discrete wavelet transform; DWT; financial crisis; business cycles; business cycle synchronisation; economic integration; Euro zone; European Union; EU markets; Macedonia; Croatia; Serbia; Bulgaria.

DOI: 10.1504/IJEPEE.2012.051367

International Journal of Economic Policy in Emerging Economies, 2012 Vol.5 No.3, pp.272 - 292

Received: 08 May 2012
Accepted: 22 Nov 2012
Published online: 15 Nov 2014 *

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Title: Business cycle regimes in a group of South East European Economies. Evidence from a threshold SUR approach

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