The influence of common currency on economic cycles of individual parts of currency union

Paul de Grauwe and Paul Krugman are two of the most significant economists who are interested in single currency influence on the economic cycle. In our paper we try to show that a complex view of argumentation of both the economists i.e. (from both the views of the individual countries and the view of individual regions) reveals that the existence of the currency union will lead to the most frequent asymmetrical shocks in the currency union mentioned. To limit ourselves only to the view of the individual countries, as the authors mentioned do, will lead to unacceptable simplification of the whole problem. Further we try finding out if after introducing single currency, economic cycles became synchronized in the eurozone. For the determination of the harmony between economic cycles use is made of the real GDP in the individual countries of the eurozone. We deal with time series from the years 1994 to 2005. With the help of the correlation coefficients we finding out if the rise of real GDP the individual countries of eurozone developed similarly as after rise of the eurozone then before. We come to the conclusion that on the basis of the result achieved it will not be possible to speak about grater harmonization of economic cycle after the rise of the eurozone. But with a view of short time series and a short period of accommodation of economies this result is in no way unacceptable.

Keywords: European Union, eurozone, imperfect competition, monetary union, Theory of Optimum Currency Areas, real Gross domestic product, economic cycle, ERM II, region, trade integration