Fiscal Policy Spillovers through Trade Openness

Georgios Karras

Journal of Economic Integration, 2014, vol. 29, 563-581

Abstract: This paper studies whether trade openness reduces the domestic fiscal multiplier, but increases the impacts of foreign fiscal shocks, i.e., the spillover effect, as suggested by theory. Using annual data from the period of 1970 to 2011, for 179 developed and developing economies, we show that domestic fiscal shocks are less potent in more open economies, while foreign (rest of the world) fiscal shocks are more potent in more open economies.

Keywords: Fiscal Policy; Fiscal Multiplier; Fiscal Spillover Effects; Trade Openness (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0641

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