SYNCHRONIZATION OF BUSINESS CYCLES IN POLAND AND THE EURO ZONE – THE WAVELET DOMAIN APPROACH

In the paper time-scale (wavelet) analysis is suggested as a tool for examining business cycle synchronization. Wavelet analysis enables to examine stochastic processes simultaneously in the time and frequency domains. Due to this the approach makes it possible to investigate time varying frequency components of economic processes. Among such components one can distinguish cycles of length over one year up to twelve years, which are known as business cycles. In the paper this approach is illustrated with an examination of business cycle synchronization between Poland and its main trading partners in the euro zone: Germany, France, Italy and the Netherlands. The empirical analysis confirms the stylized facts on the Polish business cycle: its length, similarity with the German cycle and the lead-lag relations with national cycles in the euro zone. Besides, verification of the OCA endogenity hypothesis has been undertaken, but the results obtained are ambiguous.