Measuring the business cycles similarity and convergence trends in the Central and Eastern European countries towards the Eurozone with respect to some unclear methodological aspects

Abstract

The adoption of Euro in Slovakia since January 2009 and current world economic crises revived a debate on timing of the Euro adoption in the Czech Republic and other Central and Eastern European countries. The purpose of the article is to contribute to a discussion on the process of joining the Eurozone by the Czech Republic and other candidate countries. The paper provides an analysis of few business cycle similarity and convergence measures using different indicators and detrending techniques. Measures of business cycles similarity are ordinarily used to evaluate preparedness of candidate countries to join the Eurozone. The results indicate continuing convergence of the business cycles similarity between the candidate and Eurozone member countries. The paper also sheds some light on possible influence of selected detrending techniques upon the resultant correlations. It gives a recommendation to interpret the results of business cycles correlation measuring in the close context with used methodology. A short note on a regional approach to analyse the GDP cycles is also included in a text.

Keywords

• business cycles
• convergence
• correlation
• Eurozone
• optimum currency areas