EconPapers    
Economics at your fingertips  
 

International Spillovers of U.S. Fiscal Challenges

Joshua Aizenman, William Eldén, Yothin Jinjarak, Gazi Uddin and Frida Widholm

No 32868, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Expansionary fiscal policies have increased significantly following the subprime crisis in 2007 and the COVID-19 crisis, leading to fiscal dominance concerns, where a growing share of monetary authorities may be forced to deviate from policy targets to accommodate fiscal policies. Meanwhile, peripheral economies are constantly influenced by monetary and fiscal conditions in center economies, with the United States (U.S.) as the predominant force. In light of these developments, we examine the potential international spillovers from U.S. inflationary spells and growing fiscal concerns to the policy interest rates in Emerging Market Economies (EMEs) and Developed Economies (DEs). We introduce a new index of fiscal dominance concerns using Principal Components Analysis, and extend the concept to an international perspective, as opposed to previous literature examining fiscal dominance in a domestic environment. The results are confirmed by robustness analysis and show that greater U.S. fiscal challenges affect negatively the policy rates in both EMEs and DEs, with a greater impact observed in EMEs. Moreover, a low degree of financial repression is associated with more significant spillover effects from greater U.S. fiscal challenges.

JEL-codes: E31 E62 F33 F42 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-ifn and nep-opm
Note: IFM
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w32868.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

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:nbr:nberwo:32868

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32868
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2025-03-19
Handle: RePEc:nbr:nberwo:32868