Ilori, A.E., Paez-Farrell, J. orcid.org/0000-0003-4347-5156 and Thoenissen, C. (2022) Fiscal policy shocks and international spillovers. European Economic Review, 141. 103969. ISSN 0014-2921
Abstract
The domestic and international transmission mechanism of fiscal policy shocks are analysed in the United States and in Germany. Using a Bayesian VAR approach, we find that in both of these countries a fiscal expansion is associated with increases in output as well as in private consumption and investment. The terms of trade, which affect the international transmission of fiscal policy shocks, depreciate in response to a fiscal expansion, thus transferring some of the increased domestic purchasing power abroad. A US government spending shock is expansionary for all non-US G7 members. A German government spending shock is expansionary for most, but not all European economies, both within and outside the euro area. The dynamics of the BVAR can be rationalised using a dynamic stochastic general equilibrium model where heterogeneous households and firms face borrowing constraints.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2021 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/). |
Keywords: | Fiscal policy; Bayesian VAR; DSGE modelling; International business cycles; Spillovers |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Department of Economics (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 08 Dec 2021 07:28 |
Last Modified: | 08 Dec 2021 07:28 |
Status: | Published |
Publisher: | Elsevier BV |
Refereed: | Yes |
Identification Number: | 10.1016/j.euroecorev.2021.103969 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:181349 |