Business Cycle Synchronization In Europe: Evidence From The Scandinavian Currency Union*

Abstract

In this paper we study business cycle synchronization in the three Scandinavian countries Denmark, Norway and Sweden prior to, during and after the Scandinavian Currency Union 1873-1913. We find that the degree of synchronization tended to increase during the currency union, thus supporting earlier empirical evidence. Estimates of factor models suggest that common Scandinavian shocks are important for these three countries. At the same time we find evidence suggesting that the importance of these shocks does not depend on the monetary regime. © 2011 The Authors. The Manchester School © 2011 Blackwell Publishing Ltd and The University of Manchester.