Production Networks and International Fiscal Spillovers

Michael Devereux, Karine Gente () and Changhua Yu
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Karine Gente: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper analyses the impact of fiscal spending shocks in a dynamic, multi-country model with international production networks. The response of real gross domestic product to a fiscal spending shock can be decomposed into a direct effect, income effect and price effect. The direct effect depends only on input-output linkages, while the price effect is zero in the aggregate. We apply this decomposition to the Eurozone, and find that fiscal spillovers from Germany and the core Eurozone countries can be large, and within the range of empirical estimates. Without international production networks, spillovers would be significantly smaller. In an empirical application, using the decomposition, we find results strongly consistent with the model.

Keywords: Production Network; Fiscal Policy; Spillovers; Eurozone; Nominal Rigidities (search for similar items in EconPapers)
Date: 2023-07
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Published in The Economic Journal, 2023, 133 (653), pp.1871-1900. ⟨10.1093/ej/uead014⟩

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Related works:
Journal Article: Production Networks And International Fiscal Spillovers (2023)
Working Paper: Production Networks and International Fiscal Spillovers (2022)
Working Paper: Production Networks and International Fiscal Spillovers (2022)
Working Paper: Production Networks and International Fiscal Spillovers (2020)
Working Paper: Production Network and International Fiscal Spillovers (2019)
Working Paper: Production Network and International Fiscal Spillovers (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04001164

DOI: 10.1093/ej/uead014

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