Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152248
Authors: 
Ahlborn, Markus
Wortmann, Marcus
Year of Publication: 
2017
Series/Report no.: 
Discussion Papers, Center for European, Governance and Economic Development Research 305
Abstract: 
The literature on business cycle synchronization in Europe frequently presumes an alleged 'core-periphery' pattern without providing empirical verification of the underlying cyclical (dis)similarities or the supposed but unobservable 'European business cycle(s)'. To provide a data-based country group analysis, we apply a fuzzy clustering approach to quarterly output gap series of 27 European countries over the period 1996-2015. Our results confirm the existence of a persistent core cluster as opposed to clusters on the Eastern and Southern European peripheries, highlighting the inadequate composition of the euro area (EA). Moreover, we find that Germany's business cycle is not a suitable substitute for the core. By analyzing the relation between the identified 'European core business cycle' and the peripheral cycles over time, we show diverging patterns for the southern periphery after the financial crisis, casting doubt on the endogeneity properties of the EA.
Subjects: 
business cycles
core-periphery
euro area
fuzzy cluster analysis
JEL: 
C38
E32
F15
F45
Document Type: 
Working Paper

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