Skip to main content
Log in

Identifying shocks to business cycles with asynchronous propagation

  • Published:
Empirical Economics Aims and scope Submit manuscript


This paper develops a methodology to investigate which shocks drive asynchrony of business cycles. It unites two strands of literature, those on common features and on structural VAR analysis. In particular, a lack of a common cycle between two GDPs can be traced back to at least one shock with non-collinear structural impulse responses. We apply a Wald test to the collinearity hypothesis. Empirical results on the eurozone reveal that differences in the business cycles in several peripheral countries compared to a eurozone core are triggered mainly by local shocks. Depending on the country, real or nominal shocks turn out to play a more important role.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6

Similar content being viewed by others


  1. It may be disputable to include Italy given the current situation of the public finances and their perception in the financial markets in recent years. However, Italy does not deviate from the pattern of a common cycle with Germany. This also applies to the other four countries according to LR tests on a common cycle. Thus, we can empirically confirm the findings of Carvalho and Harvey (2005).

  2. The same qualitative results are obtained when conducting the LR test for common cycles in bivariate systems only consisting of \(y_{\mathrm{core},t}\) and \(y_{\mathrm{pc},t}\).

  3. Koopman and Azevedo (2008) and Luginbuhl and Koopman (2004) find some evidence for convergence of the Spanish business cycle towards the eurozone and the German business cycles, respectively, by the end of 2000.

  4. Of course, this theoretical framework is not meant to provide a realistic description of the economy, but rather to fix ideas on the broad interpretation of our empirical results. By the same token, the terms “demand” and “nominal” as well as “supply” and “real” are used synonymously, even if they are not necessarily identical with regard to more detailed models.


  • Ahlborn M, Wortmann M (2018) The core-periphery pattern of European business cycles: a fuzzy clustering approach. J Macroecon 55:12–27

    Article  Google Scholar 

  • Ahmed S, Ickes BW, Wang P, Yoo BS (1993) International business cycles. Am Econ Rev 83(3):335–59

    Google Scholar 

  • Artis MJ (2003) Reflections on the optimal currency area (OCA) criteria in the light of EMU. Int J Finance Econ 8:297–307

    Article  Google Scholar 

  • Bayoumi T, Eichengreen B (1994) One money or many? Analyzing the prospects for monetary unification in various parts of the world. Princet Stud Int Finance 74:1–44

    Google Scholar 

  • Bayoumi T, Eichengreen B (1997) Ever closer to heaven? An optimum-currency area index for European countries. Eur Econ Rev 41:761–770

    Article  Google Scholar 

  • Beine M, Candelon B, Hecq A (2000) Assessing a perfect European optimum currency area: a common cycles approach. Empirica 27(2):115–132

    Article  Google Scholar 

  • Benkwitz A, Lütkepohl H, Neumann M (2000) Problems related to confidence intervals for impulse responses of autoregressive processes. Econom Rev 19:69–103

    Article  Google Scholar 

  • Blanchard O, Quah D (1989) The dynamic effects of aggregate demand and supply disturbances. Am Econ Rev 79:655–673

    Google Scholar 

  • Breitung J, Candelon B (2001) Is there a common European business cycle? New insights from a frequency domain analysis. Vierteljahrshefte zur Wirtschaftsforschung / Q J Econ Res 70(3):331–338

    Article  Google Scholar 

  • Camacho M, Perez-Quiros G, Saiz L (2006) Are European business cycles close enough to be just one? J Econ Dyn Control 30(9–10):1687–1706

    Article  Google Scholar 

  • Canova F, Ciccarelli M (2012) Clubmed? Cyclical fluctuations in the Mediterranean basin. J Int Econ 88:162–175

    Article  Google Scholar 

  • Canova F, Ciccarelli M, Ortega E (2012) Do institutional changes affect business cycles? Evidence from Europe. J Econ Dyn Control 36(10):1520–1533

    Article  Google Scholar 

  • Canova F, de Nicoló G (2003) On the sources of business cycles in the G-7. J Int Econ 59:77–100

    Article  Google Scholar 

  • Carvalho VM, Harvey AC (2005) Convergence in the trends and cycles of euro-zone income. J Appl Econ 20(2):275–289

    Article  Google Scholar 

  • Carvalho VM, Harvey A, Trimbur T (2007) A note on common cycles, common trends, and convergence. J Bus Econ Stat 25:12–20

    Article  Google Scholar 

  • Engle RF, Kozicki S (1993) Testing for common features. J Bus Econ Stat 11:369–380

    Google Scholar 

  • Greene WH (2008) Econometric analysis, 6th edn. Prentice Hall, Upper Saddle River

    Google Scholar 

  • Inoue A, Kilian L (2016) Joint confidence sets for structural impulse responses. J Econom 192:421–432

    Article  Google Scholar 

  • Karadimitropoulou A, León-Ledesma M (2013) World, country, and sector factors in international business cycles. J Econ Dyn Control 37(12):2913–2927

    Article  Google Scholar 

  • Kim Y, Chow HK (2003) Optimum currency area in Europe: an alternative assessment. Econ Lett 81:297–304

    Article  Google Scholar 

  • Koopman SJ, Azevedo JVE (2008) Measuring synchronization and convergence of business cycles for the Euro area, UK and US. Oxf Bull Econ Stat 70(1):23–51

    Google Scholar 

  • Kose AM, Otrok C, Whiteman CH (2008) Understanding the evolution of world business cycles. J Int Econ 75:110–130

    Article  Google Scholar 

  • Kwark N-S (1999) Sources of international business fluctuations: Country-specific shocks or worldwide shocks? J Int Econ 48(2):367–385

    Article  Google Scholar 

  • Luginbuhl R, Koopman SJ (2004) Convergence in European GDP series: a multivariate common converging trend-cycle decomposition. J Appl Econ 19(5):611–636

    Article  Google Scholar 

  • Lütkepohl H (1996) Testing for nonzero impulse responses in vector autoregressive processes. J Stat Plan Inference 50:1–20

    Article  Google Scholar 

  • Lütkepohl H (2005) New introduction to multiple time series analysis. Springer, Berlin

    Book  Google Scholar 

  • Lütkepohl H, Burda MM (1997) Modified Wald tests under nonregular conditions. J Econom 78(2):315–332

    Article  Google Scholar 

  • Lütkepohl H, Poskitt DS (1991) Estimating orthogonal impulse responses vector autoregressive models. Econ Theory 7:487–496

    Article  Google Scholar 

  • Stock JH, Watson MW (2005) Understanding changes in international business cycle dynamics. J Eur Econ Assoc 3:968–1006

    Article  Google Scholar 

  • Vahid F, Engle RF (1993) Common trends and common cycles. J Appl Econ 8:341–360

    Google Scholar 

  • Vahid F, Issler JV (2002) The importance of common cyclical features in VAR analysis: a Monte-Carlo study. J Econom 109:341–363

    Article  Google Scholar 

Download references


We are grateful to the participants of the economics research seminar at the Westfälische Wilhelms-Universität Münster. The research was supported by the Deutsche Forschungsgemeinschaft (DFG) through the SFB 884 “Political Economy of Reforms”. Part of the research was done while the first author was visiting the Humboldt Universität zu Berlin. He thanks the Humboldt Universität for its hospitality.

Author information

Authors and Affiliations


Corresponding author

Correspondence to Carsten Trenkler.

Ethics declarations

Conflict of interest

Both authors, Carsten Trenkler and Enzo Weber, declare that they have no conflict of interest.

Human and animal rights

This article does not contain any studies with human participants or animals performed by any of the authors.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Trenkler, C., Weber, E. Identifying shocks to business cycles with asynchronous propagation. Empir Econ 58, 1815–1836 (2020).

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI:


JEL Classification