Cyclical convergence inside the EU: the case of Spain

Abstract

In this paper we explore the cyclical relationships between the Spanish economy and the countries that will be in the Economic and Monetary Union (EMU). To simplify the analysis we do not consider some of the small countries and for comparison purposes we include UK, US and Japan. The cyclical patterns of each country are studied and compared to the others, as well as the international comovements of the Spanish macroeconomic variables. The main purpose is to measure the cyclical convergence of the Spanish economy developing a moving correlation coefficient to account for it. Our results are consistent with previous empirical evidence that shows a strong relationship of Spanish business cycle with the European one. We consider this evidence a good starting point for the participation in the EMU.