| The establishment of the euro zone is based on the Optimum Currency Area theory proposed by Mundell. At the initial stage, the euro zone performed well. At the beginning of21st Century, the euro zone made a great contribution to the economic development of its member countries and other major economies. However, after the outbreak of the European debt crisis, the euro zone hardly reached a consensus on how to save and support the countries influenced by the crisis. Later, more and more member countries are getting involved in this crisis. This event inspires the research of the co-movement of the business cycles in the euro zone. Before the crisis, did the phenomenon of the enhancement of the co-movement of member countries exist in the euro zone? If the answer is yes, what are the major causes of this phenomenon? To answer these questions, this paper studies on the changes in the degree of co-movement of business cycles among first members of euro zone after its establishment. Sweden, UK, USA and Japan are chosen as the group of reference countries outside the euro zone due to their similarity to the member countries either in the geographical position or in the structure of trade. Also they are closely related to the euro zone in economic field. As a result, this paper finds that the degree of co-movement of business cycles among member countries has clearly enhanced after its establishment, even though the major economies have got closer after the trend of globalization. Another interesting finding is that the co-movement of euro zone tends to converge to that of the core group led by Germany. This paper tries to explain the facts from the aspects of intensify of trade, united monetary policies and more integrated financial market, as well as the coordination of fiscal policies. Finally, based on the experiences of euro zone, some suggestions are given on the policy of future integration that might happen in East Asia. |
PDF Full Text Request