Prague Economic Papers 2014, 23(3):371-387 | DOI: 10.18267/j.pep.489

Variability of Dynamic Correlation - The Evidence of Sector-Specific Shocks in V4 Countries

Jitka Poměnková1, Svatopluk Kapounek2, Roman Marąálek1
1 Department of Radio Electronics (DREL), Brno University of Technology, Technická 12, CZ - 616 00 Brno (pomenkaj@feec.vutbr.cz, marsaler@feec.vutbr.cz).
2 Department of Finance, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, CZ - 613 00 Brno (kapounek@mendelu.cz).

We focus on changes in dynamic correlation during the recent financial crisis. The results show different responses to this symmetric shock in V4 countries. We discuss possible specialization if the dynamic correlation increases only at certain of the frequencies. Especially, in case of the Czech Republic where the variability of dynamic correlation in business cycle frequencies increased in relation to the euro area, whereas decreased in relation to Germany. Consequently, we point out to the limitations of a correlation and concordance index as common indicators of business cycle synchronization in time domain.

Keywords: real convergence, business cycle, Concordance Index, OCA theory, synchronization, frequency domain
JEL classification: C14, E32, F15

Published: January 1, 2014  Show citation

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Poměnková, J., Kapounek, S., & Marąálek, R. (2014). Variability of Dynamic Correlation - The Evidence of Sector-Specific Shocks in V4 Countries. Prague Economic Papers, 23(3), 371-387. doi: 10.18267/j.pep.489
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