Coherence of output gaps in the euro area: The impact of the COVID-19 shock

Using the measures proposed by Mink et al. (2012), we reexamine the coherence of business cycles in the euro area using a long sample period. We also analyze the impact of the COVID-19 pandemic on business cycle coherence and examine whether our measures for business cycle coherence indicate a core versus periphery within EMU. Our results suggest that business cycle coherence did not increase monotonically. The COVID-19 pandemic made that the signs of the output gaps of euro area countries became more similar, but we find large differences in the amplitude of the output gaps across countries. •We examine the coherence of business cycles in the euro area during 2002–2021.•Our measures consider both the sign and the amplitude of business cycles.•Business cycle coherence in the euro area increased, but not monotonically.•During crises that hit all euro area countries business cycle coherence increased.•The ECB monetary policies will not be optimal for all countries in the euro area.