BUSINESS C YCLE SYNCHRONIZATION

The purpose of this thesis is to conceptualize the discrepancies between the Eurozone economies and how these discrepancies can lead to differences in the functioning of the monetary transmission mechanism. First, the discrepancies are discussed from the perspective of the optimal currency area theory. Second, the workings of the monetary policy instruments of the European Central Bank are explained. Finally, these topics are put in the context of the monetary transmission mechanism and more specifically it is explained how these topics cause heterogenous monetary transmission. It is concluded that discrepancies between the Eurozone countries do lead to heterogenous transmission and that the interactions between constituents of transmission are too unpredictable to be systematically used for business cycle synchronization.