Introduction

Most studies of the possible effects of the European monetary unification process that use the Optimum Currency Areas (OCA) approach conclude that the success of European Economic and Monetary Union (when benefits outweigh costs) will depend on the capacity of European economies to give more flexibility to markets – both labour and goods and services markets – and on the degree of symmetry of future shocks (see Ramos et al., 1999). In the context of enlargement, much of the academic debate (Lättemäe, 2003) has also focused on the analysis of business cycle synchronicity. Specifically, though new Member States are expected to gain in the long run from joining the euro, the loss of monetary policy may create problems in the near term. In fact, the costs of participating in monetary union depend to a certain extent on the similarity between business cycles in the Euro area and in the new Member States. Only a few studies have considered this issue. One of the reasons for this may lie in the shortage and instability of economic data for the new Member States. In fact, as Fidrmuc (2001) states, some of these studies review periods of seven years or less, meaning that only one business cycle is covered by the available data, when in fact for the results to be reliable, the time period needed to establish this synchronisation would have to be longer.