Cross-country evidence on determinants of fiscal policy effectiveness: the role of trade and capital flows

Agata Wierzbowska and Masahiko Shibamoto

Applied Economics, 2018, vol. 50, issue 32, 3493-3514

Abstract: This article studies the determinants of size differentials between fiscal multipliers in countries around the world, both advanced and developing economies. We introduce variables not considered before for explaining multiplier size differentials, such as capital flows and the openness of capital markets, while controlling for domestic conditions and exchange rate regimes. We also disaggregate GDP into its main components in order to identify the channels through which external and internal factors can influence GDP after a change in fiscal policy. Our results point to the existence of a new channel through which fiscal policy effectiveness is affected. Capital flows, especially FDI flows, play an important role in determining the sizes of fiscal multipliers, and a country’s external conditions largely explain GDP changes after fiscal expenditure shocks. Our results also point towards a strong link between a country’s international position and its real economy.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2018.1430332 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:50:y:2018:i:32:p:3493-3514

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2018.1430332

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().