Synchronization of the business and financial cycle in the countries of the European Union

Abstract

The aim of the research is to assess the synchronization of business and financial cycles in EU countries, taking into account the division into “old” and “new” members of this group and the impact of the crisis phenomena of 2020–2022. The study used quarterly time series representing the dynamics of real GDP, credit to the private non-financial sector and main stock indices, which were subjected to a decomposition procedure. Cycle convergence was examined using spectral analysis and recursive correlation. As a result of the research, it was observed that EU countries differ in terms of the degree of impact of financial variables on the economic cycle. The group of “new” and “old” EU countries differs statistically significantly in terms of the average level of synchronization of the economic and stock market cycles. The crisis phenomena of 2020–2022 had a different impact on the degree of cycle synchronization. No clearly different reaction of the level of convergence was observed in countries geographically close to the armed conflict in Ukraine, with the exception of Poland.

Keywords

• business cycle
• credit cycle
• stock market cycle
• synchronization
• european union