The Microeconomics of Regional Development: Measuring convergences of Local and Regional Business Cycles

Our convergence analysis illustrates the usefulness of Eurostat's Economic sentiment indicators system for monitoring economic developments in the EU regions and for identifying the emergence of the waves of optimism and pessimism in the current economic and fmancial crisis. Analysing Service Confidence Indicator we provide evidence of the positive impact of economic integration on EU regions' business cycles convergence with analysing two regions i.e. CEE-5 and EU-5. Econometric evidence suggests that the existence of convergence of regions is explaining a substantial proportion of regional business cycles. Results confirm that convergence occurred at the rate of 0,6% during the whole period 2003-2011, 2,2% and 0,9% during the sub periods 2003-2007 and 2009-2011, respectively.