Contributions to the Empirics of Business Cycles in Monetary Unions and for their Public Finance System
In this set of articles, we included empirical studies about the effect of federal transfers to the synchronization of the business cycles of monetary and political unions. Some lessons are taken for the process of integration in Europe.
Among the main contributions, there are the following:
- federal transfers undoubtedly contribute to increase cyclical output. However, out-migration may increase or decrease cyclical output, depending on certain conditions;
- US federal government may improve its role in stabilizing the business cycle if some reallocation is made from procurement contracts and payments for other than individuals to direct payments for individuals, grants, and disability and retirement payments;
- synchronization of cycles is stronger inside the former Western Germany and inside the former Eastern Germany;
- Swiss cantons are closely related but there are dynamic effects toward more ‘independent’ business cycles. Despite the economic and cultural heterogeneity, Swiss cantons remain in the same political and monetary union, sharing a common central bank and a coordination/equalization mechanism for managing independent fiscal policies. Switzerland's ability to do these things should be a matter of interest to the EU.