Euro area business cycle dating
expansion and recession, and the expected time duration of the two regimes. There are three approximations to estimate the transition probability for each sample period: filtered, smoothed, and predicted probability.
The estimation of the transition probability of each sample period allows us to identify expansions and recessions over the sample period (see Kim represents mean, intercept, variance, and autoregressive-parameter matrix, respectively. M, MH, I, IH, IA, and IAH implies a variation in mean, mean and variance, intercept, intercept and variance, intercept and autoregressive parameters, and intercept, parameters, and variance, respectively.
Similar relative stability is observed for the European Union compared to the Euro Area.This issue should be taken into account by policy makers, otherwise, centralized policies could have undesirable impacts across Euro Area countries. In this way, by identifying the turning points, i.e.maximum and minimum, it is possible to identify the business cycle phases, which are expansion and recession.Recession phases have a higher persistence and longer expected time duration in the Euro Area compared to the case in the European Union.We go further and analyze the synchronization between these economies finding a low degree.