6533b82afe1ef96bd128c2b0
RESEARCH PRODUCT
Fiscal Adjustment and Business Cycle Synchronization
Ricardo M. SousaLuca AgnelloGuglielmo Maria Caporalesubject
Bilateral tradeStimulus (economics)Consolidation (business)jel:C41Inflation targetingjel:E62EconomicsBusiness cycleMonetary economicsBusiness cycle synchronizationFiscal consolidation fiscal stimulus business cycle synchronizationdescription
Using a panel of annual data for 20 countries we show that synchronized fiscal consolidation (stimulus) programmes in different countries make their business cycles more closely linked, especially in the case of fiscal adjustments lasting 2 or 3 years. We also find: (i) little 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.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2013-01-01 | SSRN Electronic Journal |