We argue that since there are several impediments to international risk sharing, the welfare gains from full international risk sharing, which have been the object of analysis in the previous literature, are not suggestive. Instead, we study the gains from feasible risk sharing and find that...

Economic shocks often permeate borders generating comovement in nations ́business cycles over time. We highlight the fact that fiscal policy coordination is an important avenue by which national economies become more integrated, influencing the transmission of macroeconomic shocks between...

It is well-known that the high synchronization of the business cycles among industrial countries cannot easily be replicated in standard open economy macroeconomic models without assuming that the exogenous shocks hitting these countries are highly correlated. We develop a two-country behavioral...

This paper studies the design, effects and interactions of monetary and fiscal policies in the euro-area and between the euro-area and the non euro-area. To do so, a stylized three-country model of monetary and fiscal policy rules is constructed. It is analyzed how monetary and fiscal rules...

We investigate empirically how industrialized countries and U.S. states share consumption risk at horizons between one and thirty years. U.S. federal states share about 50 percent of their permanent idiosyncratic risk through cross-state capital income flows. While insurance against transitory...

We introduce the technique of band spectral panel regression (BSPR) to analyze global linkages across sectors and frequency bands. It relies on decomposing time series —allowably measured in mixed observation frequency— into “deviation cycle” dynamics by frequency band. We use it to...

Using a panel of annual data for 20 countries we show that synchronized fiscal consolidation (stimulus) programmes in different countries make their business cycles more closely linked, especially in the case of fiscal adjustments lasting 2 or 3 years. We also find: (i) little evidence of...

We argue that if currency union member states have different potential output per capita, output growth rates, or trade balances, the common monetary policy may not be optimal for all of them. Euro area imbalances for potential output and for trade balances are quite large, while output growth...

This paper examines G-PPP and business cycle synchronization in the East Africa Community with the aim of assessing the prospects for a monetary union. The univariate fractional integration analysis shows that the individual series exhibit unit roots and are highly persistent. The fractional...

We analyze the transmission of global financial crisis to business cycles in China and India. The pattern of business cycles in emerging Asian economies generally displays a low degree of synchronization with the OECD countries, which is consistent with the decoupling hypothesis. By contrast,...