Panagiotis Delis
Bank of Greece

Stavros Degiannakis
Bank of Greece and Panteion University of Social and Political Sciences

George Filis
University of Patras

Theodosios Palaskas
Panteion University of Social and Political Sciences

Chrysostomos Stoforos
Panteion University of Social and Political Sciences


We assess the determinants of regional business cycles synchronization in Greece vis-à-vis the national reference business cycle, using NUTSII annual data. The computation of the time-varying synchronization is based on the dynamic estimate of a conditional variance-covariance model and subsequently a panel regression model is used to evaluate its determinants. The findings show that island regions, industrial structure, imports, savings and disposable income are the key determinants, based on the GVA business cycle synchronization vis-à-vis the national reference cycle. We also assess the determinants of employment synchronization (vis-à-vis the national employment level) and we find that regions with higher disposable income and public spending tend to drive the level of synchronization. Turning to the inter-regional synchronization we provide evidence that investments, disposable income and employment drive the GVA business cycle synchronization, whereas the employment synchronization is determined by the level of imports, disposable income and public spending, as well as, by the status of regions as island economies. We further show that the Greek economic crisis during the period 2010-2018 has dimished or eliminated the effects of the aforementioned drivers, suggesting that during the said period, sychronisation was mainly driven by the wider economic conditions. These findings lead to important policy implications, which are thoroughly discussed.

JEL-classifications: E32, F44
Keywords: Business Cycle, Employment, Synchronization, Dynamic Correlation

Acknowledgements: The views expressed in this paper are those of the authors and not necessarily those of either the Bank of Greece or the Eurosystem.The authors would like to thank the participants in research seminars at Aristotle University of Thessaloniki, University of Macedonia, Panteion University of Social and Political Sciences, Economic Chamber of Greece, Co-operative Bank of Karditsa, 2023 International Conference on Applied Theory, Macro and Empirical Finance (AMEF), 2023 International Conference Economies of the Balkan and Eastern European Countries (EBEEC) for their valuable feedback.

Stavros Degiannakis
Bank of Greece,
El. Venizelos 21, Athens 10250, Greece.
Tel.: +30-2103202386
Email: sdegiannakis@bankofgreece.gr


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