Business Cycles Synchronization between Baltic and Western European Countries

Abstract

This study examines the synchronisation of the business cycles between the Baltic States and the countries of Western Europe. The study covers the following countries: Latvia, Lithuania, France, the United Kingdom, Germany, and Estonia; and the quarterly GDP growth data during the period 1995-2017. The GDP growth data have been modified using the Hodrick-Prescott and Baxter filters to distinguish business cycles. To measure the synchronisation between the business cycles of the selected countries, the correlation between the business cycles of the countries was used. The results show that the business cycles of the Baltic and Western European countries were more synchronised in 2009-2014 than in 1998-2014. It shows that the Baltic economies are becoming more related to the European Union countries and less related to the post-Soviet countries.