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Business cycle synchronisation in EMU: Can fiscal policy bring member-countries closer?

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  • Degiannakis, Stavros
  • Duffy, David
  • Filis, George
  • Livada, Alexandra

Abstract

The present study adds to the literature on the impact of fiscal policy on business cycle synchronisation. Specifically, it investigates the effects of fiscal policy on business cycle synchronisation between 10EMU member-countries and the aggregate EMU12-wide business cycle, using a time-varying framework. The findings suggest that fiscal policy has important effects on business cycle synchronisation for all 10EMU countries. Hence, fiscal policy is shown to have the potential to be supportive of macroeconomic stabilisation in the Eurozone. However, the evidence reveals that none of the countries under examination consistently uses fiscal policy to promote business cycle synchronisation.

Suggested Citation

  • Degiannakis, Stavros & Duffy, David & Filis, George & Livada, Alexandra, 2016. "Business cycle synchronisation in EMU: Can fiscal policy bring member-countries closer?," Economic Modelling, Elsevier, vol. 52(PB), pages 551-563.
    • Handle: RePEc:eee:ecmode:v:52:y:2016:i:pb:p:551-563
    DOI: 10.1016/j.econmod.2015.09.035
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    More about this item

    Keywords

    Time-varying correlation; EMU business cycle; Business cycle synchronisation; Fiscal policy; Diag-BEKK model;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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