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

Luca Agnello, Ricardo M. Sousa, Guglielmo Maria Caporale

Risultato della ricerca: Articlepeer review

1 Citazioni (Scopus)

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.
Lingua originaleEnglish
pagine (da-a)309-329
Numero di pagine21
RivistaBulletin of Economic Research
Volume69
Stato di pubblicazionePublished - 2017

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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