Macroeconomic policy coordination and the European business cycle: Accounting for model uncertainty and reverse causality

Krzysztof Beck

doi:10.1111/boer.12334

journal article Feb 02, 2022

Macroeconomic policy coordination and the European business cycle: Accounting for model uncertainty and reverse causality

Krzysztof Beck

Bulletin of Economic Research Vol. 74 No. 4 pp. 1095-1114 · Wiley

View at Publisher Save 10.1111/boer.12334

Abstract

AbstractThis study established the relationship between macroeconomic policy coordination and business cycle synchronization, considering a dynamic panel framework that accounts for model uncertainty and reverse causality. The results show that uncoordinated fiscal policy is a source of idiosyncratic shocks, but coordinated monetary policy leads to business cycle divergence. Furthermore, ongoing monetary integration is going to be associated with lower business cycle synchronization. Establishing fiscal union can mitigate this effect by eliminating a source of asymmetric shocks associated with fiscal policy differences, and provide a substitute for independent monetary policy in the form of interregional transfers.

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Metrics

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Citations

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References

Details

Published: Feb 02, 2022
Vol/Issue: 74(4)
Pages: 1095-1114
License: View

Authors

K

Krzysztof Beck

Department of Econometric Lazarski University Warsaw Poland

Cite This Article

Krzysztof Beck (2022). Macroeconomic policy coordination and the European business cycle: Accounting for model uncertainty and reverse causality. Bulletin of Economic Research, 74(4), 1095-1114. https://doi.org/10.1111/boer.12334

Macroeconomic policy coordination and the European business cycle: Accounting for model uncertainty and reverse causality

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