The two-speed Europe in business cycle synchronization Articles uri icon


  • Camacho, Máximo
  • Caro, Ángela

publication date

  • July 2019

start page

  • 1069

end page

  • 1084


  • 3


  • 59

International Standard Serial Number (ISSN)

  • 0377-7332

Electronic International Standard Serial Number (EISSN)

  • 1435-8921


  • This paper evaluates the consequences of the financial and sovereign debt crises on the evolution of the business cycle synchronization across all the Euro Area members. We take advantage of the dimension reduction properties of dynamic factor models to summarize a large dataset of macroeconomic indicators for the Euro Area countries. Then, we estimate latent state variables based on Markov-switching methodologies to obtain a time-varying measure of business cycle synchronization. The combination of these two techniques allows us to describe the evolution in the degree of coincidence of the business cycle phases along time for this set of countries. Our results suggest that there was a general decline in the degree of business cycle synchronization across the Euro Area countries following the financial and the sovereign debt crises. Although they have recovered the levels of business cycle synchronization exhibited before these events, there are significant differences across countries in the required time to recover those levels.


  • business cycle synchronization; financial crisis; monetary union; sovereign debt crisis