Fiscal divergence and business cycle synchronization: irresponsibility is idiosyncratic.

• Authors: Darvas Z. , Rose A.K. , Szapary , Gy.
• Languages of publication: HU

Abstracts

EN

Using panels of 115 countries of world - including 21 OECD countries - and 40 years of annual data, the authors find that countries with similar government budget positions tend to have business cycles that fluctuate more closely. Thus fiscal convergence (in the form of persistently similar ratios of government surplus/deficit to GDP) is systematically associated with more strongly synchronized business cycles. Evidence is also found that reduced fiscal deficits increase business-cycle synchronization. The Maastricht 'convergence criteria', used to determine eligibility for EMU, encouraged fiscal convergence and deficit reduction. So they may, indirectly, have moved Europe closer to an optimum currency area, by reducing countries' abilities to create idiosyncratic fiscal shocks. The empirical results of the study are economically and statistically significant, and robust.

Keywords

EN

BUSINESS CYCLES; FISCAL CONVERGENCE; GDP

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Committee for Economic Sciences of the Hungarian Academy of Sciences
• Journal: Kozgazdasagi Szemle (Economic Review)
• Year: 2005
• Volume: 52
• Issue: 12
• Pages: 937-959
• Document type: ARTICLE

Contributors

author

Darvas Z.

author

Rose A.K.

author

Szapary

author

Gy.

• Z. Darvas, no address given, contact the journal editor

Identifiers

CEJSH db identifier

07HUAAAA02955991