Synchronization of Business Cycles in the Selected European Countries

The synchronization of business cycles represents one of the conditions that countries have to fulfil to become part of an optimum currency area, as well as a condition for the efficient implementation of a common economicpolicy in these countries. This paper examines the extent to which Serbia andits neighbouring countries fulfil these conditions, taking the euro area as an optimum currency area. By applying the Hodrick-Prescott and the band-pass filters, as well as the Pearson correlation coefficient and the Spearman rankcorrelation coefficient, this paper examines the synchronization of businesscycles in these countries. Taking Serbia as an example, the influence of theforeign trade volume between two countries on the similarity of their businesscycles is tested. The results show a lower harmonization of business cycles inSerbia with those in the euro area, when compared with the selected neighbouring countries, and do not confirm the thesis on the influence of the foreigntrade volume on the harmonization of business cycles.