Analyzing convergence and synchronicity of business and growth cyclesin the euro area using cross recurrence plots

Convergence and synchronisation of business and growth cycles are important issues in the efficient formulation of euro area monetary policy by the European Central Bank (ECB). Although several studies in the economics literature address the issue of synchronicity of growth within the euro area, this is the first study to address this issue using cross recurrence analysis. The main findings are that member state growth rates have largely converged since the introduction of the euro, but there is a wide degree of different synchronisation behaviours which appear to be non-linear in nature. These differences could cause problems in future implementation of a single (ECB-determined)monetary policy in the euro area.