Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121079
Authors: 
Antonakakis, Nikolaos
Tondl, Gabriele
Year of Publication: 
2011
Series/Report no.: 
FIW Working Paper 75
Abstract: 
This paper examines whether European integration, manifesting itself in increased trade and FDI linkages, new specializations and economic policy coordination, contributed to the synchronization of business cycles in the enlarged EU. We estimate the effects on bilateral growth rate correlations in 1995-2008 in a simultaneous equations model which permits to model endogenous relationships and unveil direct and indirect effects. Trade and FDI prove to have a strong impact on synchronization, specifically between incumbent and new EU members. More coordinated fiscal policies and, particularly in EU 15, the alignment of monetary policies promoted synchronization. Nevertheless, flexible exchange rates remained important adjustment instruments for the new member states. Increasing manufacturing specialization is not counteracting synchronization. The achieved EU income convergence, a declared objective of EU policy, supported business cycle synchronization.
Subjects: 
Business cycles
transmission channel
FDI
trade
monetary union
EU
JEL: 
E30
E52
E62
F15
F42
F44
Document Type: 
Working Paper

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