Economic Cycles and their Synchronization: A Comparison of Cyclic Modes in three European Countries

The present work applies singular spectrum analysis (SSA) to the study of macroeconomic fluctuations inthree European countries: Italy, The Netherlands, and the United Kingdom. This advanced spectral methodprovides valuable spatial and frequency information for multivariate data sets and goes far beyond theclassical forms of time domain analysis. In particular, SSA enables us to identify dominant cycles thatcharacterize the deterministic behavior of each time series separately, as well as their shared behavior. Wedemonstrate its usefulness by analyzing several fundamental indicators of the three countries' realaggregate economy in a univariate, as well as a multivariate setting. Since business cycles are internationalphenomena, which show common characteristics across countries, our aim is to uncover supranationalbehavior within the set of representative European economies selected herein. Finally, the analysis isextended to include several indicators from the U.S. economy, in order to examine its influence on theEuropean economies under study and their interrelationships.