The paper analyses the synchronisation of financial cycles in the early member states of the European Monetary Union, as well as their co-movement with business cycles, with the aim of formulating policy recommendations for an adequate macroprudential framework at the euro area level. Financial cycles are represented by the volume of credit to the private sector, real house prices, and share prices, while the business cycle is approximated by real GDP. The cyclical components of the observed time series were extracted with the Hodrick–Prescott filter, and their level of synchronisation was estimated using measures of static and dynamic correlation. The findings reveal that financial cycles across euro area countries are not fully synchronised, although a relatively high level of co-movement was identified between share price cycles and credit cycles, whereas housing markets markets show considerably lower levels of synchronisation. At the same time, the results confirm that financial cycles do not necessarily follow the dynamics of business cycles, highlighting the need for continuous monitoring of the financial sector in order to enable the early identification of systemic risks, both at the level of individual member states and at the level of the monetary union as a whole. The obtained results suggest that the incomplete synchronisation of financial cycles within the euro area constrains the effectiveness of a uniform macroprudential approach, and underscores the need for enhanced alignment of supranational coordination with nationally tailored macroprudential policy measures.

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