Resilience in regional business cycles across the Benelux

Focusing on NUTS2 regions of the Benelux area, we develop a methodology for measuring resilience in regional business cycles. We focus on the relative ability of regions to absorb business cycle shocks (recoverability) and their ability to isolate themselves from external disturbances (resistance). Based on Bayesian estimations of regional dynamic stochastic general equilibrium (DSGE) models, we focus upon output variability around its natural level. After estimating region-specific models by building counterfactual DSGE reference models, we disentangle the capacities for recovery and resistance in each region within the Benelux over the period 1981_2015. The results reveal very different capacities across the regions and highlight the significance of policy decisions taken in the aftermath of previous crises. We conclude by considering the implications for policy makers in the design of convergence policies and also raise methodological questions for further research.