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Fiscal policy, government size and EMU business cycle synchronization

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  • Sabrina Bunyan
  • David Duffy
  • George Filis
  • Ishmael Tingbani

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.

Suggested Citation

  • Sabrina Bunyan & David Duffy & George Filis & Ishmael Tingbani, 2020. "Fiscal policy, government size and EMU business cycle synchronization," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(2), pages 201-222, May.
    • Handle: RePEc:bla:scotjp:v:67:y:2020:i:2:p:201-222
    DOI: 10.1111/sjpe.12233
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    3. Saulius Jokubaitis & Dmitrij Celov, 2022. "Business Cycle Synchronization in the EU: A Regional-Sectoral Look through Soft-Clustering and Wavelet Decomposition," Papers 2206.14128, arXiv.org.
    4. Krzysztof Beck, 2022. "Macroeconomic policy coordination and the European business cycle: Accounting for model uncertainty and reverse causality," Bulletin of Economic Research, Wiley Blackwell, vol. 74(4), pages 1095-1114, October.

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