Using a panel of 21 OECD countries and 40 years of annual data, Darvas, Rose, and Szapary find that countries with similar government budget positions tend to have business cycles that fluctuate more closely.

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Using a panel of 21 OECD countries and 40 years of annual data, Darvas, Rose, and Szapary find that countries with similar government budget positions tend to have business cycles that fluctuate more closely. That is, fiscal convergence (in the form of persistently similar ratios of government surplus/deficit to GDP) is systematically associated with more synchronized business cycles. The authors also find that reduced fiscal deficits increase business cycle synchronization. The Maastricht "convergence...