Further evidence on the international business cycle and the ERM: is there a European business cycle?

Successful exchange rate regimes impose policy disciplines that are likely to lead to conformity in the business cycles of the participating countries. This conjecture is borne out in the paper by the evidence in it that the business cycle affiliation of ERM member countries has shifted from the United States to Germany since the formation of the ERM. This effect is bolstered by the growing links in trade between the EU countries. The United Kingdom is conspicuous among the latter in that its business cycle affiliation did not change in the period covered by the study.