IDEAS home Printed from https://ideas.repec.org/a/aic/saebjn/v69y2022i3p361-376n6.html
   My bibliography  Save this article

The Effect of Fiscal Policy Asymmetries on Business Cycle Correlation in the EU

Author

Listed:
  • Ladislava Issever Grochová

    (Faculty of Business and Economics, Mendel University in Brno)

  • Petr Rozmahel

    (Faculty of Business and Economics, Mendel University in Brno)

  • Marek Litzman

    (Faculty of Business and Economics, Mendel University in Brno)

Abstract

This paper reviews the role of bilateral fiscal differences, fiscal indiscipline and their joint effects in particular in determining business cycle synchronicity in the European Union (EU). Panel data comprising 28 EU members from 1999–2019 are used in the analysis. The two-step Instrumental Variable–Generalized Method of Moments (IV–GMM) is employed to estimate the effects of examined fiscal measures on business cycle correlations. The study finds that fiscal indiscipline doubles the negative effect of increasing fiscal differences on business cycle correlation compared to fiscally disciplined country-pairs. The findings suggest reopening the debate on fiscal policy coordination across Europe.

Suggested Citation

  • Ladislava Issever Grochová & Petr Rozmahel & Marek Litzman, 2022. "The Effect of Fiscal Policy Asymmetries on Business Cycle Correlation in the EU," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 69(3), pages 361-376, September.
    • Handle: RePEc:aic:saebjn:v:69:y:2022:i:3:p:361-376:n:6
    as

    Download full text from publisher

    File URL: http://saeb.feaa.uaic.ro/index.php/saeb/article/view/1678
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ansgar Belke & Clemens Domnick & Daniel Gros, 2017. "Business Cycle Synchronization in the EMU: Core vs. Periphery," Open Economies Review, Springer, vol. 28(5), pages 863-892, November.
    2. Helmut Wagner, 2014. "Can We Expect Convergence through Monetary Integration? (New) OCA Theory versus Empirical Evidence from European Integration," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 56(2), pages 176-199, June.
    3. Schalck, Christophe, 2012. "Investigating heterogeneity in European fiscal behaviours," Research in Economics, Elsevier, vol. 66(4), pages 383-390.
    4. Kwanho Shin & Yunjong Wang, 2003. "Trade Integration and Business Cycle Synchronization in East Asia," Asian Economic Papers, MIT Press, vol. 2(3), pages 1-20.
    5. Luca Agnello & Guglielmo Maria Caporale & Ricardo M. Sousa, 2017. "How Do Fiscal Consolidation And Fiscal Stimuli Impact On The Synchronization Of Business Cycles?," Bulletin of Economic Research, Wiley Blackwell, vol. 69(4), pages 309-329, October.
    6. Antje Hildebrandt & Isabella Moder, 2015. "Business cycle synchronization between the Western Balkans and the European Union," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 8-25.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Uctum Merih & Uctum Remzi & Vijverberg Chu-Ping C., 2021. "The European growth synchronization through crises and structural changes," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 25(1), pages 1-17, February.
    2. Beck, Krzysztof, 2021. "Why business cycles diverge? Structural evidence from the European Union," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    3. Nagayasu, Jun, 2010. "Macroeconomic interdependence in East Asia," Japan and the World Economy, Elsevier, vol. 22(4), pages 219-227, December.
    4. Mariarosaria Comunale, 2017. "Synchronicity of real and financial cycles and structural characteristics in EU countries," CEIS Research Paper 414, Tor Vergata University, CEIS, revised 25 Sep 2017.
    5. Calderon, Cesar & Chong, Alberto & Stein, Ernesto, 2007. "Trade intensity and business cycle synchronization: Are developing countries any different?," Journal of International Economics, Elsevier, vol. 71(1), pages 2-21, March.
    6. Shruthi Jayaram, 2009. "Examining the Decoupling Hypothesis for India," Working Papers id:2119, eSocialSciences.
    7. Lee, Grace H.Y. & Azali, M., 2010. "The endogeneity of the Optimum Currency Area criteria in East Asia," Economic Modelling, Elsevier, vol. 27(1), pages 165-170, January.
    8. Alcidi, Cinzia & D’Imperio, Paolo & Thirion, Gilles, 2023. "Risk-sharing and consumption-smoothing patterns in the US and the Euro Area: A comprehensive comparison," Structural Change and Economic Dynamics, Elsevier, vol. 64(C), pages 58-69.
    9. Emmanouil Karakostas, 2022. "The Effects of Protectionism on the Exports of the Trade Partners: A Composite Index," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 15(1), pages 58-70, July.
    10. Florence Huart & Médédé Tchakpalla, 2019. "Labor Market Conditions and Geographic Mobility in the Eurozone," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(2), pages 263-284, June.
    11. Rana, Pradumna B., 2007. "Trade Intensity and Business Cycle Synchronization: The Case of East Asia," Working Papers on Regional Economic Integration 10, Asian Development Bank.
    12. Kumakura, Masanaga, 2006. "Trade and business cycle co-movements in Asia-Pacific," Journal of Asian Economics, Elsevier, vol. 17(4), pages 622-645, October.
    13. Carlos Cortinhas, 2007. "Intra-industry trade and business cycles in ASEAN," Applied Economics, Taylor & Francis Journals, vol. 39(7), pages 893-902.
    14. Gießler Stefan & Heinisch Katja & Holtemöller Oliver, 2021. "(Since When) Are East and West German Business Cycles Synchronised?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 241(1), pages 1-28, February.
    15. Hoang Sang Nguyen & Fabien Rondeau, 2019. "The transmission of business cycles: Lessons from the 2004 enlargement of the EU and the adoption of the euro," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 27(3), pages 729-743, July.
    16. Sabrina Bunyan & David Duffy & George Filis & Ishmael Tingbani, 2018. "Bilateral business cycle synchronisation in the EMU: What is the role of fiscal policy and government size?," Working Papers 2018.02, International Network for Economic Research - INFER.
    17. Szafranek, Karol, 2021. "Disentangling the sources of inflation synchronization. Evidence from a large panel dataset," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 229-245.
    18. de Truchis, Gilles & Keddad, Benjamin, 2013. "Southeast Asian monetary integration: New evidences from fractional cointegration of real exchange rates," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 26(C), pages 394-412.
    19. Linda Glawe & Helmut Wagner, 2021. "Divergence Tendencies in the European Integration Process: A Danger for the Sustainability of the E(M)U?," JRFM, MDPI, vol. 14(3), pages 1-22, March.
    20. Wang, Ruting & Althof, Michael & Härdle, Wolfgang Karl, 2023. "A financial risk meter for China," Emerging Markets Review, Elsevier, vol. 56(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aic:saebjn:v:69:y:2022:i:3:p:361-376:n:6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sireteanu Napoleon-Alexandru (email available below). General contact details of provider: https://edirc.repec.org/data/feaicro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.