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The international transmission of US fiscal shocks

Filippo Natoli () and Luca Metelli ()

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate the international propagation of fiscal policy shocks originated in the United States using a Global VAR framework. We identify shocks to US tax rates and government spending by using narrative series as external instruments, following the proxy SVAR methodology. The main results of the paper are the following: (1) the domestic effects of tax shocks are stronger than those of a government spending shock (2) spillovers are in most cases positive and significant, albeit of small size; (3) the boost to exports in recipient economies, stimulated both by stronger US demand and by real exchange rate depreciation vis-à-vis the US dollar, is the main transmission channel; financial channels (through long-term interest rates and equity prices) also play a role.

Keywords: international fiscal spillovers; proxy SVAR; GVAR (search for similar items in EconPapers)
JEL-codes: C22 C25 E62 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-opm
Date: 2018-01-17
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