Empirical Analysis of Business Cycle Synchronization and Shock Similarity Between Romania and the Eurozone

Abstract

The paper aims to evaluate the degree of business cycle synchronization and the similarity of production structures between Romania and the eurozone, drawing a comparison with other new member states. Although there has been significant progress, business cycle correlation with the eurozone is still lower in Romania than in other regional peers. Moreover, the empirical evidence regarding the similarity of production structures reveals a widening gap vis-à-vis the eurozone during the transition period. The results suggest that it is less advisable for Romania to join the eurozone than for other countries in Central and Eastern Europe.

Keywords:

• business cycle
• convergence
• optimum currency areas
• structural shock