Are EU and Bulgarian business cycles synchronized?

This paper examines the degree of business cycles synchronisation between Bulgaria and the European Union (EU). The period of the study is 1999 Q1 – 2007 Q2. Using cross spectral analysis, we find that both economic areas share two common cycles at the frequencies of 0.029 and 0.59 cycles (34 and 17 quarters, respectively) but they exhibit a negative phase shift, implying that their phase takes place at different times (their phases are not coordinated).Further, the transmission mechanism of stochastic shocks, expressed by impulse response functions from a VAR model, shows that shocks in these two economic areas are absorbed within 5-11 quarters. Hence, we conclude that the Bulgarian and the European business cycles are not coordinated and the costs of participating in the EU should be taken into account.