“Out of Sync”: The Breakdown of Economic Sentiment Cycles in the EU



This article is corrected by:

  1. Errata: Erratum Volume 22, Issue 2, 422, Article first published online: 1 April 2014

  • We would like to thank the associate editor, Alan Woodland, and two anonymous referees for extensive comments that improved the content and presentation of the paper. All remaining errors are ours. A monthly ESI analysis for all EU economies can be found at quantf research, http://www.quantf.com.


Empirical evidence is presented about the properties of economic sentiment cycle synchronization for Germany, France and the UK and they are compared with the “crisis” countries Italy, Spain, Portugal and Greece. Instead of using output data it is preferred to focus on the economic sentiment indicator (ESI), a forward-looking, survey-based variable consistently available from 1985. The cyclical nature of the ESI allowed the analyis of the presence or not of synchronicity among country pairs before and after the onset of the financial crisis. The results show that ESI movements were mostly synchronous before 2008 but they exhibit a breakdown after 2008, with this feature being more prominent in Greece. It is also found that, after the political maneuvering of the past two years, a cycle re-integration or re-synchronization is on the way. An analysis of the evolution of the synchronicity measures indicates that they can potentially be used to identify sudden phase breaks in ESI co-movement and they can offer a signal as to when the EU economies are getting “in” or “out of sync”.