Gabriele Tondl , Europainstitut and Department of Economics, Vienna University of Economics & BA, Vienna, Austria, Iulia Traistaru, Center for European Integration Studies, University of Bonn , Bonn, Germany
Regional Business - Cycle Convergence in the European Union (assigned to theme
This paper aims to test and analyze the convergence of regional business cycles in the European Union. Using data for NUTS 2 regions over the period 1980 - 2003 we first estimate bilateral correlations of the cyclical components of regional real gross value added for pairs of regions. Second we estimate the degree of convergence between regional business cycles and the euro zone. We assess the role of borders, bilateral distance, similarity of economic structures, economic and monetary integration in fostering convergence of business cycles among regions in the framework of a dynamic panel model taking into account parameter heterogeneity. The experience of the euro area regions is used as a benchmark for drawing lessons for the new EU countries about the impact of monetary integration on the cyclical convergence across regions. Our analysis is relevant in the context of the discussion about the macroeconomic adjustment to region-specific shocks in an enlarged European Monetary Union.
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