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Monetary Policy and Business Cycle Synchronization in Europe

Rémi Odry and Roman Mestre

No 2021-19, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: In this paper, we investigate the role of the monetary policy adopted by the European Central Bank (ECB) in business cycle synchronization in Europe between 2000 and 2018. To this aim, we employ wavelets to compute the pairwise business cycle correlations (BCC) at different frequencies and use Generalized Method of Moments (GMM) dynamic estimators in panel to explain their variations. Our results show that monetary policy has a long-term impact on the synchronization of business cycles in Europe. More specifically, we find that the adopted unconventional monetary policies impact positively the synchronization. Finally, we show that fiscal policies can be used as tools to fix country-specific movements of business cycles.

Keywords: Business cycle synchronization; Monetary policy; EMU; Europe (search for similar items in EconPapers)
JEL-codes: C01 E37 E52 E58 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2021
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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