European Review of Economic History, 2015, Vol. 19(4), pp.382-411
Relying on dynamic factor business cycle indices for five South-East European countries (Austria(-Hungary), Bulgaria, Greece, Romania, and Serbia/Yugoslavia), we document steadily increasing synchronization as part of a pan-European business cycle before 1913 and the emergence of a regional business cycle (including and radiating from Germany) in the interwar period. These dynamics were largely driven by trade, involving initially England, France, and Germany but increasingly centered on Germany. Our results also show that the Balkan countries traveled a long way from an economic backwater of Europe in the 1870s to a much more integrated part of the European economy six decades later.