Positive externalities of the EU cohesion policy: Toward more synchronised CEE countries?

Benoit Dicharry and Lubica Stiblarova ()
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Benoit Dicharry: University of Strasbourg
Lubica Stiblarova: Technical University of Kosice

International Economics and Economic Policy, 2023, vol. 20, issue 3, No 6, 485-508

Abstract: Abstract The aim of this paper is to examine the role of the payments from the European Cohesion Policy (ECP) in the business cycle synchronisation of the EU–28 countries in the time period 2000–2016. The emphasis is especially placed on the Central and Eastern European (CEE) countries, given their status as the biggest ECP recipients; we investigate whether the ECP can serve as an instrument to promote their synchronisation which presents one of the prerequisites for the adoption of common monetary policy in the Economic and Monetary Union (EMU). By applying a panel instrumental variables estimation, our results suggest that the ECP provides a positive externality regarding increased synchronicity in the EMU, suggesting that the ECP should be further strengthened to foster business synchronicity in the Euro Area. Further analysis reveals that the systematically identified driving forces are the European Regional Development Fund (ERDF) and the Cohesion Fund (CF). The current European recovery plan ‘Next Generation EU’ could, therefore, have a promoting effect on the EMU’s monetary policy if it is designed as an additional structural investment fund promoting financial and trade integration.

Keywords: Business cycle synchronisation; Economic and monetary union; Supranational fiscal transfers; European integration; European Cohesion Policy (search for similar items in EconPapers)
JEL-codes: E32 F44 F45 O47 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10368-023-00566-9

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