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This survey of business cycle synchronization in the European monetary union focuses on two issue: have business cycles become more similar, and, which factors drive business cycle synchronization. We conclude that business cycles in the euro area have gone through periods of both convergence and divergence. Still, there is quite some evidence that during the 1990s business cycle synchronization in the euro area has increased. Higher trade intensity is found to lead to more synchronization, but the point estimates vary widely. The evidence for other factors affecting business cycle synchronization is very mixed.

We examine the relationship between political instability and economic growth. Using an exploratory factor analysis we identify four dimensions of political instability: (1) mass civil protest, (2) politically motivated aggression, (3) instability within the political regime and (4) instability of the political regime. We show that individual political instability indicators are generally poor proxies for the underlying dimensions of political instability. Our panel estimates for a sample of 98 countries in the period 1984-2003 indicate that the various dimensions of political instability have different effects on economic growth.

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Fiscal adjustments, OECD countries, H62,