CEE business cycles still out of sync with eurozone, Polish paper finds

A working paper from an economist at the National Bank of Poland looks into the business cycles in eurozone economies and the economies of European Union (EU) member states in central and eastern Europe (CEE), finding that differences remain despite increased convergence.

The paper, Business Cycles in EU New Member States: How and Why are They Different?, by Marcin Kolasa, uses the business cycle accounting framework to investigate the differences between economic fluctuations in the two groups.

Kolasa's results indicate that business cycles in the CEE countries do differ from those observed in the eurozone, even though substantial convergence has been achieved after the eastern EU enlargement.

Having decomposed output movements into the contributions of four economic ‘wedges', affecting production technology, agents' intra- and inter-temporal choices, and the aggregate resource constraint, he finds the major differences concern the importance of the intra- and inter-temporal wedges, which account for a larger proportion of output fluctuations in the CEE region and also exhibit relatively little co-movement with their euro area counterparts.