TY - JOUR
T1 - Business cycles and trends in Germany and Portugal
T2 - macroeconomic policy implications in the Euro Area
AU - Costa, Leonardo
AU - Oliveira, Francisca Guedes de
AU - Leitão, Alexandra
AU - Paredes, José
PY - 2021
Y1 - 2021
N2 - We describe the neoclassical view of the business cycle by European Institutions in the Euro Area, and derive the stylized facts of business cycles and trends for Germany and Portugal in the period 1991–2018. The data are extracted from the European Commission’s AMECO database. To separate cycle and trend, we use the decomposition available in the AMECO database for the output, and the Hodrick-Prescott filter for the other variables. The results show that the amplitude of the business cycle and persistence of shocks are greater in Portugal than in Germany. They also show that the stylized facts of the business cycles of the two economies are quite different. Moreover, common shocks have asymmetric consequences. In the long run, there has been a convergence of inflation, general government structural balances, and real unit labour costs, but general government consolidated gross debt, fixed investment, and per capita potential GDP have been increasingly diverging, despite the behaviour of real wages and net exports in the two countries. Additionally, temporary shocks have permanent effects on the Portuguese economy. The results raise questions about the place-neutral macroeconomic policy enforced by the European institutions in the Euro Area, particularly in what concerns cohesion Member States.
AB - We describe the neoclassical view of the business cycle by European Institutions in the Euro Area, and derive the stylized facts of business cycles and trends for Germany and Portugal in the period 1991–2018. The data are extracted from the European Commission’s AMECO database. To separate cycle and trend, we use the decomposition available in the AMECO database for the output, and the Hodrick-Prescott filter for the other variables. The results show that the amplitude of the business cycle and persistence of shocks are greater in Portugal than in Germany. They also show that the stylized facts of the business cycles of the two economies are quite different. Moreover, common shocks have asymmetric consequences. In the long run, there has been a convergence of inflation, general government structural balances, and real unit labour costs, but general government consolidated gross debt, fixed investment, and per capita potential GDP have been increasingly diverging, despite the behaviour of real wages and net exports in the two countries. Additionally, temporary shocks have permanent effects on the Portuguese economy. The results raise questions about the place-neutral macroeconomic policy enforced by the European institutions in the Euro Area, particularly in what concerns cohesion Member States.
KW - Core and periphery
KW - Euro Area
KW - Macroeconomic policy
KW - Place-based approach
KW - Stylized facts
UR - http://www.scopus.com/inward/record.url?scp=85087482766&partnerID=8YFLogxK
U2 - 10.1080/09654313.2020.1766424
DO - 10.1080/09654313.2020.1766424
M3 - Article
AN - SCOPUS:85087482766
SN - 0965-4313
VL - 29
SP - 654
EP - 680
JO - European Planning Studies
JF - European Planning Studies
IS - 4
ER -