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Business cycle synchronization and insurance mechanisms in the EU

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Author Info
António Afonso () (Directorate General Economics, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
Davide Furceri () (University of Illinois at Chicago, Department of Economics (M/C 144), University of Illinois at Chicago, 601 S. Morgan Street, Chicago, 60607, Illinois, USA.)

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Abstract

In this paper we provide a positive exercise on past business-cycle correlations and risk sharing in the European Union, and on the ability of insurance mechanisms and fiscal policies to smooth income fluctuations. The results suggest in particular that while some of the new Member States have well synchronized business cycles, for some of the other countries, business cycles are not yet well synchronized with the euro area’s business cycle, and risk-sharing mechanisms may not provide enough insurance against shocks. JEL Classification: E32, E42, F41, F42.

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Paper provided by European Central Bank in its series Working Paper Series with number 844.

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Length: 35 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:ecb:ecbwps:20070844

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Keywords: EU; optimum currency areas; business cycle synchronization; insurance mechanisms.;

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. António Afonso & Davide Furceri, 2008. "Government size, composition, volatility and economic growth," Working Paper Series 849, European Central Bank. [Downloadable!]
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