Abstract
In light of several economic and financial crises and institutional changes experienced by the European countries, we examine whether these economies achieved synchronization of their business cycles and fostered synchronization of their growth rates. Controlling for reverse causality, we conduct multiple endogenous break tests and find that (i) several endogenous break dates correspond to idiosyncratic shocks affecting individual countries or major shocks in international arena but not the adoption of the euro; this result suggests that the convergence process has been nonlinear for a number of countries and that studies imposing break dates exogenously, such as the launch of euro, may lead to biased conclusions; (ii) while output growth was increasingly synchronized for some countries, integration occurred in an asymmetric way and it did not change or did not occur for others despite being in the same common currency area (iii) convergence has been prevalent among the non-Eurozone economies in our sample.
Acknowledgement
The first author gracefully acknowledges partial funding from PSC-CUNY research award #TRADA-48-705.
Appendix
Estimation of models with endogenous regressors (Perron-Yamamoto).
| Belgium | Denmark | Netherlands | Portugal | Spain | Sweden | |
|---|---|---|---|---|---|---|
| 1st sub-period | 1975.02–1995.01 [240] | 1975.02–2013.06 [461] | 1975.02–2013.06 [461] | 1975.02–2003.12 [347] | 1975.02–1991.09 [200] | 1975.02–1985.11 [130] |
| α1 | 0.001 | − | − | 0.01*** | − | − |
| (0.67) | (4.14) | |||||
| β1 | 0.21* | 0.43*** | 0.35*** | 0.12 | 0.18 | 0.12 |
| (1.93) | (3.49) | (3.34) | (1.08) | (0.79) | (0.59) | |
| δ1 | −0.21 | 0.11 | −0.08 | 0.38** | 0.04 | −0.42 |
| (−1.11) | (0.49) | (−0.34) | (2.32) | (0.96) | (−0.99) | |
| γ1 | 0.28 | 0.25 | 0.37*** | −0.18 | 0.17 | 0.77** |
| (1.51) | (1.18) | (2.34) | (−0.88) | (0.52) | (2.45) | |
| 2d sub-period | 1995.02–2013.06 [221] | 2004.01–2013.06 [114] | 1991.10–2013.06 [261] | 1985.12–2013.06 [331] | ||
| α2 | 0.002** | −0.005** | − | − | ||
| (2.24) | (−2.40) | |||||
| β2 | 0.57*** | 0.67*** | −0.23 | 0.39*** | ||
| (5.60) | (4.15) | (−1.54) | (3.79) | |||
| δ2 | −0.21 | 0.57* | 2.47*** | 0.07 | ||
| (−1.17) | (1.96) | (4.33) | (0.42) | |||
| γ2 | 0.04 | −0.19 | −0.17 | 0.54*** | ||
| (0.29) | (−0.73) | (−1.00) | (3.51) | |||
Numbers in parentheses are t-values. Subscript i = 1, 2 attached to parameters denote the ith sub-period. When no break is estimated, the 1st subperiod is equivalent to the full period. ***,** and * represent 1, 5 and 10% levels of significance, respectively. When intercepts where insignificant they have been removed from the model before reestimation. Dates in italics are the significant breakpoints at the 5% level.
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Supplementary Material
The online version of this article offers supplementary material (DOI: https://doi.org/10.1515/snde-2018-0097).
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