Cross-border effects of fiscal policy in the Eurozone

A.C. Bicu and Lenard Lieb
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A.C. Bicu: General Economics 0 (Onderwijs)
Authors registered in the RePEc Author Service: Andreea Bicu-Lieb

No 19, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)

Abstract: We empirically assess spillovers from fiscal policy in the Euro area. We propose a structural multi-country factor-augmented vector autoregression model identified with sign restrictions and analyse the domestic and international effects of fiscal policy measures. By extracting information from an extended set of country specific and cross-border variables, we are able to account for the different channels through which government expenditure shocks are transmitted within as well as across borders. We find significant negative effects of fiscal consolidations on domestic output, private consumption and investment. More importantly, spending cuts in Italy and Spain induce significant and persistent output spillovers on Germany and France.

Date: 2015-01-01
New Economics Papers: this item is included in nep-eec and nep-mac
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:unm:umagsb:2015019

DOI: 10.26481/umagsb.2015019

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