NDLI: Does integration and economic policy coordination promote business cycle synchronization in the EU?

Content Provider	Springer Nature Link
Author	Antonakakis, N. Tondl, G.
Copyright Year	2014
Abstract	Previous studies have discounted important factors and indirect channels that might contribute to business cycle synchronization (BCS) in the EU. We estimate the effects of market integration and economic policy coordination on bilateral business cycle correlations over the period 1995–2012 using a simultaneous equations model that takes into accounts both the endogenous relationships and unveils direct and indirect effects. The results suggest that (1) trade and FDI have a pronounced positive effect on BCS, particularly between incumbent and new EU members. (2) Rising specialization does not decouple business cycles. (3) The decline of income disparities in EU27 contributes to BCS, as converging countries develop stronger trade and FDI linkages. (4) There is strong evidence that poor fiscal discipline of EU members is a major impediment of business cycle synchronization. (5) The same argument holds true for exchange rate fluctuations that hinder BCS, particularly in EU15. Since BCS is a fundamental prerequisite and objective in an effective monetary union, the EU has to promote market integration and strengthen the common setting of economic policies.
Starting Page	541
Ending Page	575
Page Count	35
File Format	PDF
ISSN	03408744
Journal	Empirica
Volume Number	41
Issue Number	3
e-ISSN	15736911
Language	English
Publisher	Springer US
Publisher Date	2014-04-23
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Business cycle Synchronization Transmission Direct and indirect effect FDI Trade Monetary union EU European Integration International Economics Macroeconomics/Monetary Economics Econometrics Industrial Organization Public Finance & Economics
Content Type	Text
Resource Type	Article
Subject	Geography, Planning and Development Development Economics and Econometrics

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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