International Trade and Business Cycle Synchronization in Poland, the European Union and the Euro Zone

The analysis of business cycle synchronization levels has become a key point in the discussion of the processes of international economic integration. Economists show a particular interest in analyzing the frequency of processes of business cycle convergence and divergence (decoupling) in the European Union, especially in the Euro Zone. One of the factors determining business cycle convergence in economies is the intensity and structure of international trade. The aim of this paper is to analyze the influence exerted by international trade over the synchronization of business cycles in Poland, the European Union and the Euro Zone from 1995 to 2011. The analytical methods employed here encompass a review of the literature on macroeconomics and international finance, as well as econometric models (such as the Vector Autoregression Model). The results of empirical research indicate that an increase in trade turnover does not necessarily lead to greater business cycle synchronization in the economies under analysis. In fact, the impact of an increase in countries’ turnover on the synchronization of their business cycles depends predominantly on the structure of trade turnover and not solely on the intensity of trade.


Introduction
The analysis of business cycle synchronization levels, i.e., the correlation of the periodic component of gross domestic product (GDP), has become a key point in the discussion of the processes of international economic integration. Economists show a particular interest in analyzing the frequency of the processes of business cycle convergence and divergence (decoupling) in the European Union, especially in the Euro Zone.
Thus, a question arises as to whether business cycles in the Euro Zone are becoming more or less synchronized over time. If the European economy is truly in the process of economic divergence, pursuing a common economic policy, e.g., monetary policy, might not be equally effective from the perspective of each country or region in the European Union.
One of the factors determining economies' business cycle convergence is the intensity and structure of international trade. Nevertheless, considering existing economic theory, the influence of two nations' trade on the synchronization of their business cycles is not well-defined. Kenen (1969) was the first to suggest that highly diversified economies with a high percentage of intra-industry trade experience asymmetric shocks fairly infrequently. On the other hand,

The nature and main determinants of business cycle synchronization
The degree of business cycle synchronization between two countries or regions is defined as the convergence of their economic growth rates over time, which is characterized by the correlation of the pe- In essence, the total effect of an increase in the intensity of international trade on business cycle correlation is equivocal and depends on the level of economic development of the countries under analysis.
According to Imbs (2004), the level of similarity of economic (industrial) structures and the degree of specialization both exercise influence over the level of business cycle synchronization because economic shocks in a given industrial sector cause a greater in-

Results of selected empirical analyses concerning business cycle synchronization
The latest economic literature on international trade focuses mainly on the issue of the influence of international trade integration on the synchronization of business cycles (Akin, 2006).   and 1999. Their study demonstrated that countries characterized by a greater intensity of bilateral trade were marked by a higher degree of business cycle synchronization and that the influence of trade integration on business cycle synchronization was higher in economically developed countries than in developing countries. Moreover, it was proven that the greater the degree of production structure asymmetry among the countries under analysis, the weaker the influence of the trade intensity on business cycle correlation.
In contrast, the results of empirical analyses encompassing 12 East Asian countries by Shin and Wang (2003) demonstrated that intra-industry trade was the main factor contributing to business cycle synchronization in those economies. Nonetheless, the intensification of international trade itself does not necessarily lead to greater business cycle synchronization, which results from the fact that an increase in countries' total trade turnover is usually accompanied by the development of intra-industry trade, which in turn leads to specialization and diversification of production structures in particular countries (Lubiński 2007). Bayoumi and Eichengreen (1992) claim that European Union member states can be divided into two groups:. dominating (core) member states, where comparable economic shocks occur, and peripheral countries, which experience asymmetric shocks. In dominating states, the structure of the economy is highly diversified and the intra-industry trade very intense, whereas the peripheral states are highly specialized in inter-industry trade.
Conversely, in line with the results of research carried out by Krugman (1991), the process of economic integration leads to more asymmetric business fluctuations, which results in lesser synchronization of business cycles. The results of a survey by Camacho, Perez-Quiros, and Saiz (2006) also suggest that economic integration causes increased regional concentration of economic activity, which consequently leads to sectorrelated or regional economic shocks, thus increasing the probability of occurrence of asymmetric shocks or divergent business cycles.
In conclusion, the outcome of the overwhelming majority of empirical analyses demonstrates that the influence of an increase in countries' trade turnover on the synchronization of their business cycles is not only related to the intensity of trade relationships but also to the structure of trade. In other words, if countries' trade turnovers are dominated by intra-industry trade, symmetric shocks are to be expected in these countries, as well as a greater synchronization in business cycles. However, if countries' trade turnovers are dominated by inter-industry trade, more frequent asymmetric shocks and lesser business cycle synchronization are to be expected (Kose & Yi, 2005).

Model-based analysis of international trade against business cycle synchronization
As presented in the economic literature, the influence of trade integration on the synchronization of business cycles in countries or groups of countries is predominantly measured using a model developed by Frankel and Rose (1998), which is represented by the following equation: where:   Drysdel, Garnaut (1993), and Yeats (1997), which is expressed by the following equation:       Next, the models were estimated using the Vector Autoregression Model proposed by Sims (1980).
The VAR method consists of analyzing a given phenomenon using a system of equations, which, according to Sims (1980), eliminates the problem of predictor variables' exogeneity. The results of the International trade and business cycle synchronization in Poland, the European Union and the Euro Zone

Conclusion
The empirical study carried out in this paper was concerned with the influence of international trade on the International trade and business cycle synchronization in Poland, the European Union and the Euro Zone