Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/220045
Authors: 
Boehm, Hannes
Schaumburg, Julia
Tonzer, Lena
Year of Publication: 
2020
Series/Report no.: 
Tinbergen Institute Discussion Paper TI 2020-008/III
Abstract: 
We analyze 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 synchronization. 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 Synchronization
Industry Dynamics
Spatial Model
JEL: 
E32
F44
G10
Document Type: 
Working Paper

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