Sectoral specialisation in the EU a macroeconomic perspective



Table 12 Sectoral co-movement

(in percentage

points)

Agriculture

Industry

Construction

Trade

Finance

Public
services

Business
activities

1980s

1990s

1980s

1990s

1980s

1990s

1980s

1990s

1980s

1990s

1980s

1990s

1980s

1990s

Belgium

0.29

0.21

0.78

0.74

0.17

0.73

0.21

0.47

0.04

0.06

0.62

0.77

0.20

0.32

Denmark

0.24

0.08

0.63

0.69

0.66

0.41

0.52

0.52

0.63

0.17

0.23

0.35

0.12

0.26

Germany

0.04

0.27

0.78

0.79

0.35

0.23

0.75

0.83

0.05

0.12

0.36

0.67

0.28

0.44

Greece

na

na

na

na

na

na

na

na

na

na

na

na

na

na

Spain

0.29

0.10

0.77

0.83

0.50

0.78

0.65

0.77

0.34

0.51

0.27

0.41

0.49

0.68

France

0.16

0.15

0.69

0.72

0.49

0.67

0.95

0.64

0.35

0.00

0.78

0.78

0.12

0.17

Ireland

na

na

na

na

na

na

na

na

na

na

na

na

na

na

Italy

0.36

0.65

0.91

0.72

0.04

0.33

0.79

0.92

0.33

0.05

0.50

0.37

0.05

0.31

Luxembourg

na

na

na

na

na

na

na

na

na

na

na

na

na

na

Netherlands

na

0.09

na

0.37

na

0.51

na

0.94

na

0.19

na

0.48

na

0.00

Austria

na

0.03

na

0.73

na

0.43

na

0.69

na

0.05

na

0.47

na

0.25

Portugal

na

na

na

na

na

na

na

na

na

na

na

na

na

na

Finland

0.32

0.65

0.86

0.81

0.82

0.19

0.98

0.93

0.80

0.38

0.47

0.62

0.81

0.39

Sweden

0.32

0.32

0.72

0.89

0.69

0.77

0.45

0.96

0.44

0.41

0.22

0.42

0.55

0.40

United Kingdom

0.14

0.14

0.94

0.78

0.98

0.89

0.82

0.25

0.42

0.73

0.78

0.94

0.90

0.93

EU average

0.24

0.29

0.79

0.78

0.52

0.56

0.68

0.70

0.38

0.27

0.47

0.59

0.39

0.43

3 SECTORAL
COMPOSITION
AND BUSINESS
CYCLES


Sources: Eurostat, NCBs, ECB calculations.

Notes: The table reports the share of the variance of the business cycle component of each sector explained by the aggregate business
cycle for the periods 1980-1990 and 1991-2001. Formally:
Var (β1 BC^a + β2 BC^g + β3 BC β' )/ Var pCsecto"J where β1, β2 and
are the estimated coefficients of the impact of the aggregate business cycle component at lags -1, 0, and 1 ( BCf , BC^g and BC^g )
on the business cycle component of sector
i, i.e. BCfector l = β1BCfG + β2BC^^g + β3BC^^g + εt .1 One lead and one lag are included
in order to take short sectoral leads or lags into account. The EU average only includes Belgium, Denmark, Germany, Spain, France, Italy,
Finland, Sweden and the UK to guarantee comparability between the 1980s and 1990s.

1 As stressed by Christiano and Fitzgerald (1998), op. cit., measuring co-movements of n different series by computing the correlation
of each series with an aggregated one can lead to an over-optimistic interpretation in terms of synchronisation. However, the risk is
played down when n increases. Here, n=7 (number of sectors) seems sufficient to prevent biased interpretations.

in the UK and - to a lesser extent - Spain and
Sweden, while showing very low co-movement
in Germany and Italy.
Public services are
generally characterised by relatively modest co-
movement, with the exception of the UK, while
co-movement for
business activities was
modest only in certain countries (Denmark,
Italy and Sweden) but relatively high in others
(UK, Belgium and France).

There was some increase in co-movement in the
1990s compared with the previous decade in
Belgium, Germany, Spain and Sweden, while in
the remaining countries the evolution was more
differentiated. In some cases, there was even a
marked decline in sectoral co-movement,
indicating special factors influencing the
particular evolution in this sector. For instance,
trade and finance in France, trade in the UK,
finance in Italy and construction in Finland
moved further away from the aggregate
business cycle in the 1990s than they were in
the 1980s.

3.5 CONCLUSION

Sectors are characterised by substantial
heterogeneity regarding their short-term output
volatility. Moreover, important changes in
sectoral output volatility have been documented
in this section. As these sectoral characteristics
are of potential importance for the pattern of
aggregate business cycle behaviour among EU
countries, it has been evaluated to what extent
these characteristics - together with different
patterns of sectoral specialisation across EU
countries - have influenced business cycle
developments of Member States and business
cycle synchronisation across the euro area and
the EU.

ECB

Occasional Paper No. 19
July 2004



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