Using quarterly data for a panel of advanced economies, we show that synchronized fiscal consolidation (stimulus) programmes in different countries make their business cycles more closely linked. We also find: (i) some evidence of decoupling when an inflation targeting regime is unilaterally adopted; (ii) an increase in business cycle synchronization when countries fix their exchange rates and become members of a monetary union; (iii) a positive effect of bilateral trade on the synchronization of business cycles. Global factors, such as a rise in global risk aversion and uncertainty and a reversal of nonstandard expansionary monetary policy, can also reduce the degree of co-movement of business cycles across countries. From a policy perspective, our work shows that an inflation targeting regime coupled with simultaneous fiscal consolidations can lead to more business cycle synchronization.

Agnello, L., Caporale, G., Sousa, R. (2017). HOW DO FISCAL CONSOLIDATION AND FISCAL STIMULI IMPACT ON THE SYNCHRONIZATION OF BUSINESS CYCLES?. BULLETIN OF ECONOMIC RESEARCH, 69(4), 309-329 [10.1111/boer.12101].

HOW DO FISCAL CONSOLIDATION AND FISCAL STIMULI IMPACT ON THE SYNCHRONIZATION OF BUSINESS CYCLES?

AGNELLO, Luca
;
2017-01-01

Abstract

Using quarterly data for a panel of advanced economies, we show that synchronized fiscal consolidation (stimulus) programmes in different countries make their business cycles more closely linked. We also find: (i) some evidence of decoupling when an inflation targeting regime is unilaterally adopted; (ii) an increase in business cycle synchronization when countries fix their exchange rates and become members of a monetary union; (iii) a positive effect of bilateral trade on the synchronization of business cycles. Global factors, such as a rise in global risk aversion and uncertainty and a reversal of nonstandard expansionary monetary policy, can also reduce the degree of co-movement of business cycles across countries. From a policy perspective, our work shows that an inflation targeting regime coupled with simultaneous fiscal consolidations can lead to more business cycle synchronization.
2017
http://www.blackwellpublishers.co.uk/journals/BOER/descript.htm
Agnello, L., Caporale, G., Sousa, R. (2017). HOW DO FISCAL CONSOLIDATION AND FISCAL STIMULI IMPACT ON THE SYNCHRONIZATION OF BUSINESS CYCLES?. BULLETIN OF ECONOMIC RESEARCH, 69(4), 309-329 [10.1111/boer.12101].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10447/243231
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