Authors: Athanasios Anastasiou, Athina Zervoyianni

Title: EU Structural Funds: Do They Increase the Degree of Synchronization of Macroeconomic Fluctuations Across Europe?

Abstract

While the question of whether or not the EU’s structural funds generate more growth has been extensively analyzed in the literature, much less is known about the impact of such funds on the degree of symmetry of business-cycle fluctuations across Europe. This paper examines the relationship between the EU’s structural funds and the synchronization of macroeconomic fluctuations across the member states using data covering the period 1995-2014. Our results support the hypothesis of a positive but weak association between synchronization of macroeconomic fluctuations and all types of structural funds taken together. This holds after accounting for endogeneities and after controlling for other standard influences on synchronization, including bilateral trade flows and convergence of economic policies. Nevertheless, the synchronization effect is stronger and more robust for certain types of structural funds, particularly those related to specific sub-objectives. Overall, our results have important policy implications as they provide insights into which type of EU funds could reduce macroeconomic asymmetries in Europe, something essential for the successful functioning of the internal market.