Economic cycle synchronization in the context of financial crisis: empirical evidence of Denmark, Sweden and United Kingdom

Abstract

The paper focuses on the economic cycle synchronization of the euro area outsiders: Denmark, Sweden and United Kingdom. The authors discussed openness of the selected economies, their structural similarities and economic cycle synchronization in the years 2000–2011. They applied moving correlation and correlation between the selected countries and the euro area. They found significant synchronization of the economic cycles after the year 2005. Furthermore, economic cycles of the analyzed countries were exceptionally synchronized than the euro area average level.Our contribution is in comparison of the economic cycle synchronization in the selected countries with the euro area average. The authors assume that changes in order provide important information about the synchronization, unbiased by the consequences of the financial crisis in the year 2007.A theoretical background for the final discussions provided new version of the OCA theory focused on the costs associated with the loss of the monetary policy autonomy. The authors concluded that selected countries were not protected against the global macroeconomic shock after the year 2007, although they keep the autonomous monetary policy.

Keywords

• OCA theory
• moving correlation
• monetary policy efficiency
• co-movements
• euro rejection