Business cycle desynchronisation: Amplitude and beta versus co-movement
In collaboration with associates Ansgar Belke and Clemens Domnick of the University of Duisburg-Essen, Daniel Gros published a study on VoxEU, posted 19 January 2017. The three economists argue that the elasticity with which countries react to the common cycle is as equally important for the creation of an optimum currency area as is the more conventional criterion of a high correlation of business cycles. Their research shows that a country with a non-unitary growth elasticity relative to the common area will experience cyclical divergences at the peak and trough of the common cycle. They further find that the eurozone suffers from widely differing amplitudes despite being characterised by highly-correlated business cycles.
Ansgar Belke is Ad personam Jean Monnet Professor for Macroeconomics and Director of the Institute of Business and Economic Studies, University of Duisburg-Essen. Clemen Domnick is PhD candidate, Chair of Macroeconomics, University of Duisburg-Essen. Daniel Gros is Director of CEPS.