Fragmented Integration and Business Cycle Synchronization in the Greek Regions

Abstract

This paper examines the degree of business cycle synchronicity among Greek regions and investigates the determinants of the business cycle co-movements of output associated with specific functional and spatial aspects of the integration process among the Greek regions. We analyse nearly 30 years (1980–2008) of data at the NUTSIII level (prefectures). We conclude that the business cycles of prefectures are more synchronized with the NUTSII regional cycle than with the national business cycle revealing a regional (NUTSII) border effect. Moreover, the intensification of the integration process seems to diachronically affect the structural characteristics of the Greek regions and the geography of cyclical synchronization. Our study reveals a two-stage integration process where in the first stage we detect the existence of urbanization economies, while in the second one the existence of localization economies. Furthermore, our study reveals that the metropolitan regions have a low level of business cycle synchronicity with the other regions, stressing Greece's pattern of economic and structural dualism.