Suchergebnisse

The paper examines the effects of asymmetries in fiscal policy conduct upon the correlation of business cycles in the European Union. In particular the paper estimates the effects of fiscal indiscipline and dissimilarity on business cycle correlation in the period 1996-2012 using a panel of 27 EU countries. The paper pays special attention to Central and Eastern European countries and examines the effects of interactions between fiscal policy measures and the fact that the country has not yet adopted the Euro. The results show a significant and robust negative effect of fiscal indiscipline and dissimilarity upon business cycle correlation in the EU. The paper also provides some evidence for the significance of intra-industry trade as well as of the interactions between fiscal measures and non-Euro area membership. The study provides arguments for fiscal policy harmonisation and fiscal discipline of the Euro area member as well as acceding countries, as undisciplined and dissimilar fiscal policies are shown as sources of business cycle deviations from the average European cycle.

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.

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