Euro Area Business Cycle Network (€ABCN)

The estab­lish­ment of the sin­gle cur­rency is a unique oppor­tu­nity for econ­o­mists to learn more about the rela­tion­ship between busi­ness cycles, eco­nomic insti­tu­tions, mon­e­tary pol­icy and finan­cial mar­kets. This can­not be just a the­o­ret­i­cal exer­cise. There is evi­dent need for high-​quality data and empir­i­cal research. The Net­work intends to become a defin­i­tive source of data and research out­put on Euro economies. In time, it will also serve to define the Euro area eco­nomic research agenda.

This web­site has a key role to play in facil­i­tat­ing the exchange of ideas and knowl­edge at both the con­cep­tual and prac­ti­cal level. We invite all those researchers who are actively engaged in this area, whether they work in insti­tu­tions such as banks and sta­tis­ti­cal offices or in acad­e­mia, to use its facil­i­ties to con­tribute infor­ma­tion and research.

Estab­lish­ing key facts on the Euro area busi­ness cycle

In set­ting out to estab­lish the key facts on the Euro area busi­ness cycle, the Net­work is seek­ing answers to the fol­low­ing questions:

• what are the dri­ving forces under­ly­ing the Euro area aggre­gate busi­ness cycle? What is , for exam­ple, the evi­dence on the con­jec­ture that the US and UK cycles are dri­ven by con­sump­tion while the Euro area cycle would be dri­ven by investment?
• can a set of stylised facts char­ac­ter­is­ing the Euro area busi­ness cycle be put together? Is there in par­tic­u­lar a mean­ing­ful or pre­ferred def­i­n­i­tion of the Euro area busi­ness cycle and of its cor­re­spond­ing turn­ing points? What would then be the dif­fer­ences with respect to the US, view­ing this coun­try as a sort of empir­i­cal ‘benchmark’?
• can the Euro area be treated as a closed econ­omy? To what extent is the Euro area cycle linked to or affected by cycli­cal devel­op­ments elsewhere?
• what are the var­i­ous types of link­ages to the rest of the world, how impor­tant are these and have these changed over time?

Mon­i­tor­ing busi­ness cycle in practice

Mon­i­tor­ing the busi­ness cycle entails:

• dis­cov­er­ing whether sig­nif­i­cant dif­fer­ences in busi­ness cycle behav­iour across the Euro coun­tries can be quan­ti­fied and iden­ti­fied (in terms e.g. of co-​movements and lead-​lag rela­tions)? Why are there, if any, still sub­stan­tial dif­fer­ences in busi­ness cycles after mon­e­tary union took place;
• iden­ti­fy­ing the rel­e­vant coin­ci­dent and lead­ing indi­ca­tors to the Euro area cycli­cal devel­op­ments. Sev­eral national banks are already sys­tem­at­i­cally com­par­ing avail­able Euro area coin­ci­dent indi­ca­tors and one objec­tive is to co-​ordinate such exercises;
• deter­min­ing if there is, for exam­ple, a par­tic­u­lar role for mon­e­tary and finan­cial indi­ca­tors in pre­dict­ing out­put and inflation;
• assess­ing indices such as core infla­tion, national and sec­toral indi­ca­tors, such as ser­vice sec­tor indicators;
• ascer­tain­ing whether error in assess­ing the cycli­cal posi­tion of the rel­e­vant econ­omy affects pol­icy deci­sions and how this is (or should be) taken into account.