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Fiscal policy, government size and EMU business cycle synchronization

Fiscal policy, government size and EMU business cycle synchronization
Fiscal policy, government size and EMU business cycle synchronization

We provide new evidence on the effects of fiscal policy and government size on pairwise business cycle synchronization in EMU. A novel time-varying framework is employed to estimate business cycle synchronization and subsequently a panel approach is used to establish the role of fiscal variables in determining the pairwise synchronization observations across time. The findings suggest similarities in the size of the public sector, yet divergence in fiscal policy stance, matter for the determination of business cycle synchronization. Hence, increased fiscal federalism in EMU will contribute to increased business cycle synchronization. Our results remain robust to different specifications and sub-periods.

business cycle synchronization, EU business cycles, fiscal policy, time-varying correlation
0036-9292
201-222
Bunyan, Sabrina
40ec732e-782d-482a-b145-60a60a6ecb6d
Duffy, David
f995496e-afa8-46e1-943c-f1b94204b505
Filis, George
0a11b1dc-f5e4-4384-8964-5b9c37dd29ef
Tingbani, Ishmael
e6b2741a-d792-4adf-84cc-a2f64d5545ca
Bunyan, Sabrina
40ec732e-782d-482a-b145-60a60a6ecb6d
Duffy, David
f995496e-afa8-46e1-943c-f1b94204b505
Filis, George
0a11b1dc-f5e4-4384-8964-5b9c37dd29ef
Tingbani, Ishmael
e6b2741a-d792-4adf-84cc-a2f64d5545ca

Bunyan, Sabrina, Duffy, David, Filis, George and Tingbani, Ishmael (2020) Fiscal policy, government size and EMU business cycle synchronization. Scottish Journal of Political Economy, 67 (2), 201-222. (doi:10.1111/sjpe.12233).

Record type: Article

Abstract

We provide new evidence on the effects of fiscal policy and government size on pairwise business cycle synchronization in EMU. A novel time-varying framework is employed to estimate business cycle synchronization and subsequently a panel approach is used to establish the role of fiscal variables in determining the pairwise synchronization observations across time. The findings suggest similarities in the size of the public sector, yet divergence in fiscal policy stance, matter for the determination of business cycle synchronization. Hence, increased fiscal federalism in EMU will contribute to increased business cycle synchronization. Our results remain robust to different specifications and sub-periods.

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sjpe.12233 - Version of Record
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More information

Accepted/In Press date: 9 September 2019
e-pub ahead of print date: 1 November 2019
Published date: 1 May 2020
Keywords: business cycle synchronization, EU business cycles, fiscal policy, time-varying correlation

Identifiers

Local EPrints ID: 443837
URI: http://eprints.soton.ac.uk/id/eprint/443837
ISSN: 0036-9292
PURE UUID: bddfb234-8ae6-46e2-9977-0617ae903be9
ORCID for Ishmael Tingbani: ORCID iD orcid.org/0000-0002-4012-1224

Catalogue record

Date deposited: 14 Sep 2020 16:36
Last modified: 26 Nov 2021 03:22

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Contributors

Author: Sabrina Bunyan
Author: David Duffy
Author: George Filis

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