Determinants of regional business cycle synchronization in Greece

Panagiotis Delis, Stavros Degiannakis, George Filis, Theodosios Palaskas and Chrysostomos Stoforos
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Theodosios Palaskas: Panteion University of Social and Political Sciences
Chrysostomos Stoforos: Panteion University of Social and Political Sciences

No 329, Working Papers from Bank of Greece

Abstract: We assess the determinants of regional business cycles synchronization in Greece vis-Ã -vis the national reference business cycle, using NUTSII annual data. The computation of the time-varying synchronization is based on the dynamic estimate of a conditional variance-covariance model and subsequently a panel regression model is used to evaluate its determinants. The findings show that island regions, industrial structure, imports, savings and disposable income are the key determinants, based on the GVA business cycle synchronization vis-Ã -vis the national reference cycle. We also assess the determinants of employment synchronization (vis-Ã -vis the national employment level) and we find that regions with higher disposable income and public spending tend to drive the level of synchronization. Turning to the inter-regional synchronization we provide evidence that investments, disposable income and employment drive the GVA business cycle synchronization, whereas the employment synchronization is determined by the level of imports, disposable income and public spending, as well as, by the status of regions as island economies. We further show that the Greek economic crisis during the period 2010-2018 has dimished or eliminated the effects of the aforementioned drivers, suggesting that during the said period, sychronisation was mainly driven by the wider economic conditions. These findings lead to important policy implications, which are thoroughly discussed.

Keywords: Business Cycle; Employment; Synchronization; Dynamic Correlation. (search for similar items in EconPapers)
JEL-codes: E32 F44 (search for similar items in EconPapers)
Pages: 32
Date: 2024-05
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Journal Article: Determinants of regional business cycle synchronization in Greece (2024)
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