The emergence of a European region: Business cycles in South-East Europe from political independence to World War II

Relying on dynamic factor business cycle indices for five South-East European countries (Austria(-Hungary), Bulgaria, Greece, Romania, Serbia/Yugoslavia), we document steadily increasing synchronisation as part of a pan-European business cycle before 1913 and the emergence of a regional business cycle (including and radiating from Germany) in the interwar period. These dynamics were largely driven by trade, involving initially England, France and Germany but increasingly centred on Germany. Our results also show that the Balkan countries travelled a long way from an economic backwater of Europe in the 1870s to a much more integrated part of the European economy six decades later.