The Concordance Index of the Business Cycles in the Czech Republic and other selected Central and Eastern Europen Countries and the Eurozone

Abstract

The paper deals with the evaluation of the preparedness of the Czech Republic and other candidate countries to join the Eurozone. The main goal is to asses the level of business cycle similarity in the selected Eurozone member and candidate countries using the Concordance index. Business cycle similarity belongs among the criteria defined within the theory of optimum currency areas. The first order differencing procedure, Hodrick-Prescott filter and Christiano-Fitzgerald band pass filter were used to identify the classical and growth GDP cycles. The results show that the Czech Republic belongs among the states with relatively high level of concordance comparing to the other Eurozone member and candidate countries. Accordingly, the measure of business cycle concordance should not serve as an argument for slowing down of the monetary integration process in the Czech Republic. The resultant concordance measures also give an evidence of relatively low level of the business cycle similari­ty of Slovak economy and the Eurozone, which might imply a possibly higher risk of the asymmetric shock occurrence in Slovakia.

Keywords

• Eurozone
• business cycle
• concordance index