Sensitivity of fiscal-policy effects to policy coordination and business cycle conditions

Matti Virén

No 11/2013, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: This paper deals with the problems of assessing the effects of fiscal policy in the European Monetary Union. Here, we face wide cross-country differences in key fiscal parameters, some of which may also be vary over time (business cycle). Moreover, these effects may also depend on trade spillover effects and thus on the extent of policy coordination. Our empirical analyses make use of data for 15 EU countries, mainly for the period 1970-2011. The results clearly indicate that fiscal multipliers are not constant across countries and time, being much larger during economic recessions. By contrast, the policy coordination-effects appear to be more homogenous, although it turns out that small countries may benefit more from coordination.

Keywords: Fiscal policy; policy coordination; government deficit; EMU Classification (search for similar items in EconPapers)
JEL-codes: E61 E63 H62 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2013_011

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