Business Cycle Synchronization - The Effects of Bilateral Trade Intensity and Economic Development

There are groups of countries for which booms and recessions of economic activity occur approximately at the same time. They are said to have synchronous business cycles. However, there are countries the economic activity of which fluctuates very unevenly in relation to one another. This book uses several different methodologies to evaluate what effects the several factors have on bilateral business cycle synchronization. The book finds strong evidence that the bilateral trade intensity and similarity of economic development have the effect on business cycle synchronization. The findings of this work suggest that the true costs of joining a monetary union might be overestimated due to convergence and increased trade after joining a monetary union. The book also discusses how the findings may have implications to the coordination of fiscal policy between countries, financial portfolio management as well as the help in the discussion of which currency regime to choose: free float or a fix.