This book offers the reader a state-of-the-art overview on theory and empirics of business cycle synchronisation, structural reform and economic integration. Focusing on the ongoing integration process in the euro area and the EU, it analyses the integration process that has taken place since the 1980s and which is marked by the advent of the euro and the substantial enlargement that resulted from the accession of 12 new Member States in East and Southern Europe.

Abstract: In early January 2003, the United States and Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua launched official negotiations for the Central American Free Trade Agreement (CAFTA), a treaty that would expand NAFTA-style trade barrier reductions to Central America. With deeper trade integration between Central America and the United States, it is expected that there will be closer links in business cycles between Central American countries and the United States. The paper finds a relatively low degree of business cycle synchronization within Central America as well as between Central America and the United States. The business cycle synchronization is expected to increase only modestly with further trade expansion, making the coordination of macroeconomic policies within CAFTA somewhat less of a priority.

"This study analyses business cycle synchronisation in the euro area and beyond from different angles. First, a comprehensive survey of the relevant literature is provided in chapter 2. The em-pirical analysis starts in chapter 3 with the determination of output gaps as the most important indi-cator of the cyclical stance of the economies. Different methods are applied to account for the un-certainty surrounding the estimation of this unobserved variable. Then, cross-country correlations of the output gaps and their evolution over time are determined. A cluster analysis is undertaken in order to identify countries sharing similar business cycle characteristics. Time-varying patterns in euro area business cycle synchronisation may be a reflection of global phenomena, rather than being genuine to the euro area. Therefore, the findings for the euro area are put into a global per-spective. In particular, business cycle co-movement is analysed also for the EU countries outside the euro area, the OECD countries in general, and for the states within the US as well as within the group of the G7 countries."--p. iii.

Deeper trade integration between Central America and the United States, as envisaged under the Central American Free Trade Agreement, is likely to lead to closer links between Central American and U.S. business cycles. This article assesses the degree of business cycle synchronization between Central America and the United States-relevant not only for a better understanding of the influence of important trading partners on the business cycle fluctuations in the domestic economy but for evaluating the costs and benefits of macroeconomic coordination.

This paper assesses the strength of business cycle synchronization between 1950 and 2014 in a sample of 21 countries using a new quarterly dataset based on IMF archival data. Contrary to the common wisdom, we find that the globalization period is not associated with more output synchronization at the global level. The world business cycle was as strong during Bretton Woods (1950-1971) than during the Globalization period (1984-2006). Although globalization did not affect the average level of co-movement, trade and financial integration strongly affect the way countries co-move with the rest of the world. We find that financial integration de-synchronizes national outputs from the world cycle, although the magnitude of this effect depends crucially on the type of shocks hitting the world economy. This de-synchronizing effect has offset the synchronizing impact of other forces, such as increased trade integration.

This paper examines the impact of rising trade and financial integration on international business cycle comovement among a large group of industrial and developing countries. The results provide at best limited support for the conventional wisdom that globalization has increased the degree of synchronization of business cycles. The evidence that trade and financial integration enhance global spillovers of macroeconomic fluctuations is stronger for industrial countries. One striking result is that, on average, cross-country consumption correlations have not increased in the 1990s, precisely when financial integration would have been expected to result in better risk-sharing opportunities, especially for developing countries.