Synchronization between Euro area countries and factors affecting the synchronization

Monetary union, the most important stage in economic integration, has been im-plemented within European Union (EU) in 1999. The criteria of optimum currency area theory assert that countries clustering around a unique single currency have to carry out similar policies. Trade among countries, which are a membership of monetary union, is significant in synchronization process. If trade among countries is intense and has an intra-industry trade characteristic, synchronization will increase between these countries. Since intra-industry trade occurs among countries producing similar goods, countries may implement similar policies. However, as the trade among countries is inter-industry, each country specializes in different sectors. Each country prefers implementing own national policy rather than similar policies.European Monetary Union (EMU), in which countries delegate their monetary policy to supra-national institutions and internalize rule-based policies, has an important role in Turkey?s trade. Panel data analysis supports that increasing intra-industry trade between Turkey and Euro area accelerates GDP synchronization among them. Countries have to synchronize their domestic economy policies, as well as intra-industry trade. Likewise, intra-industry trade, policies comprising flexible employment increase syn-chronization between Turkey and Euro area countries. Contractionary fiscal policies and reducing government debts also increase GDP synchronization. However, urbanization is influenced in each country by different determinants that affect negatively GDP syn-chronization.