Cross-border spill-overs from fiscal stimulus in a monetary union

Ruthira Naraidoo, Eric Schaling and Mewael F. Tesfaselassie

Economic Modelling, 2017, vol. 65, issue C, 95-105

Abstract: We analyse domestic and cross-border effects of fiscal policy in a two-region business cycle model of a monetary union. Without relying on debt consolidation via spending reversals along the lines of Corsetti, Meier and Mueller (2010) and Corsetti and Mueller (2014) we show that a fiscal expansion by the core economies of the euro area is associated with crowding in of both core and periphery consumption. Interestingly, cross-border spill-over effects are larger the larger the share of credit constrained households in the periphery.

Keywords: Fiscal policy; New-Keynesian model; Open economy; Monetary union; Rule-of-thumb consumers; Habit persistence (search for similar items in EconPapers)
JEL-codes: E62 F42 F45 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999316308550
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:65:y:2017:i:c:p:95-105

DOI: 10.1016/j.econmod.2017.05.010

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().