Fiscal Convergence, Business Cycle Volatility and Growth

Davide Furceri

No 674, OECD Economics Department Working Papers from OECD Publishing

Abstract: This paper analyzes the effects of fiscal convergence on business cycle volatility and growth. Using a panel 21 OECD countries (including 11 EMU countries) and 40 years of data, we find that countries with similar government budget positions tend to have smoother business cycles. That is, fiscal convergence (in the form of persistently similar ratios of government surplus/deficit to GDP) is systematically associated with smoother business cycles. We also find evidence that reduced business cycle volatility through higher fiscal convergence stimulates growth. Our empirical results are economically and statistically significant and robust.

Convergence budgétaire, volatilité des cycles économiques et croissance Ce document analyse les effets de la convergence budgétaire sur la volatilité des cycles économiques et la croissance. En utilisant un échantillon de 21 pays de l’OCDE (incluant 11 pays de la zone euro) sur 40 ans, nous trouvons que les pays qui ont des positions budgétaires similaires tendent à avoir des cycles plus lisses. Cela signifie que la convergence budgétaire (sous la forme de ratios de déficit en point de PIB constamment similaires) est systématiquement associée à des cycles économiques plus lisses. Nous trouvons également qu’une volatilité des cycles économiques réduite grâce à une convergence budgétaire stimule la croissance. Nos résultats empiriques sont économiquement et statistiquement significatifs et robustes.

Keywords: business cycle volatility; convergence budgétaire; croissance économique; economic growth; fiscal convergence; volatilité des cycles économiques (search for similar items in EconPapers)
JEL-codes: E44 G20 G21 G28 R21 (search for similar items in EconPapers)
Date: 2009-02-25
New Economics Papers: this item is included in nep-bec, nep-eec, nep-fdg and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
https://doi.org/10.1787/226475824848 (text/html)

Related works:
Journal Article: Fiscal Convergence, Business Cycle Volatility, and Growth (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:674-en

Access Statistics for this paper

More papers in OECD Economics Department Working Papers from OECD Publishing Contact information at EDIRC.
Bibliographic data for series maintained by ().