Macroeconomic Synchronization and Monetary Unions: Is the Euro Area more Synchronous than other Monetary Unions and are Monetary Unions more Synchronous than non-Monetary Unions?

Abstract

Within currency unions, the conventional wisdom is that there should be a high degree of macroeconomic synchronicity between the constituent parts of the union. But this has not been tested compared to a base sample of countries that do not belong to a monetary union, so this paper endeavors to do exactly that. Although the US is probably one of the longest standing monetary unions in existence, there are others such as Canada and Australia, which have similar federalist structures and relatively independent States or Provinces. In this paper we take euro area data, US State macro data, Canadian provincial data and Australian state data �namely real Gross State Product (GSP), the GSP de�ator and unemployment data �and use techniques relating to recurrence plots to measure the degree of synchronicity of movement over time. The results are expected to show that for the most part monetary unions are more synchronous than non-monetary unions and that the euro area data is highly synchronous, particularly since the �financial crisis, compared to other monetary unions