Synchronization of the Polish and European Business Cycles

We employ spectral and VAR methods with quarterly real GDP data to examine the synchronization between the European and the Polish business cycles. Our results show that both areas experience a common cycle at the frequency of 0.045 cycles (22 quarters or 5.5 years). Since the main question in the empirical analyses of the business cycle in a monetary union is whether the business cycles are synchronized, our findings confirm that both business cycles are dominated by the same frequency, but, there is a time lag between these two cycles. Therefore, the costs of participation in the monetary union, in comparison to the benefits, are not negligible.