Fiscal Convergence, Business Cycle Volatility and Growth [electronic resource] / Davide Furceri = Convergence budgétaire, volatilité des cycles économiques et croissance / Davide Furceri

By:

Furceri, Davide

Material type: Article

ArticleSeries: OECD Economics Department Working Papers ; no.674.Publication details: Paris : OECD Publishing, 2009.Description: 28 p. ; 21 x 29.7cmOther title:

Convergence budgétaire, volatilité des cycles économiques et croissance

Subject(s):

Economics

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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.

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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.

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