Quaderni del Dipartimento di Scienze Economiche e Matematico-Statistiche dell'Università del Salento - Collana di Economia

One of the definitions of an optimal currency area is based on the similarity of the business cycle. In the Italian case, this question has important political implications,given the discussion about the separation of the Northern regions from the Centre and the South.
We analyse the inter-regional business cycle in Italy employing frequency domain methods. We find clear evidence that regional business cycles in Italy in the period 1950-2000 cannot be seen as being similar. The intra-national transmission of the business cycle shows some variation over time: we find a strong interaction in the 50s, while during the 60s and 70s, the relationship becomes weaker. Since the beginning of the 80s, the co-movement of cycles in the North and the South increases again.