Characteristics of Tunisian business cycle and international synchronisation

In this paper, we have applied spectral and cross spectral analysis techniques as an alternative approach to characterize the Tunisian business cycle and measure the degree of its international synchronization. As a robustness check, we have applied these techniques to the industrial production (overall and manufacturing IPI) as well as two synthetic indexes: a dynamic factor and a diffusion index. We found the presence of two types of cycles: a minor cycle of 12.5 quarters (3.1 years) detected in Tunisia and in all its European trade partners and a major cycle of 33.3 quarters (8.3 years) observed in the majority of the cycles studied. The cross-spectral analysis provides a strong evidence of synchronization of the Business cycle in Tunisia and its European partners, particularly at high frequencies. The volatility of the Tunisian business cycle is generally lower than that of the European cycle. It is even lower for longer cycles. The transmission of cyclical shocks from the Euro Area to Tunisia is instantaneous for short cycles. The delays are much longer for the major cycles. They can reach 5 to 6 quarters.