Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/213562 
Year of Publication: 
2020
Series/Report no.: 
IWH Discussion Papers No. 2/2020
Publisher: 
Halle Institute for Economic Research (IWH), Halle (Saale)
Abstract: 
We analyse whether financial integration between countries leads to converging or diverging business cycles using a dynamic spatial model. Our model allows for contemporaneous spillovers of shocks to GDP growth between countries that are financially integrated and delivers a scalar measure of the spillover intensity at each point in time. For a financial network of ten European countries from 1996-2017, we find that the spillover effects are positive on average but much larger during periods of financial stress, pointing towards stronger business cycle synchronisation. Dismantling GDP growth into value added growth of ten major industries, we observe that some sectors are strongly affected by positive spillovers (wholesale & retail trade, industrial production), others only to a weaker degree (agriculture, construction, finance), while more nationally influenced industries show no evidence for significant spillover effects (public administration, arts & entertainment, real estate).
Subjects: 
financial integration
business cycle synchronisation
industry dynamics
spatial model
JEL: 
E32
F44
G10
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.