Warpings in Time: Business and Financial Cycle Synchronization in the Euro Area

After the financial crisis and the European debt crisis, business and financial cycle synchronization across the euro area became a key concern for the effectiveness of the European Central Bank's monetary policy. In this context, “Warpings in Time: Business and Financial Cycle Synchronization in the Euro Area” by Tom Bugdalle and Moritz Pfeifer introduces a novel method for assessing cycle synchronization. By constructing multivariate composite indices and using Dynamic Time Warping (DTW), the authors offer a new and openly available indicator to track cycle synchronization in the euro area. Their approach tries to overcome the limitations of traditional divergence metrics and provides a new tool for policymakers to evaluate the impacts of monetary policy.