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Spillovers from US Government Spending Shocks: Impact on External Positions

Author

Listed:
  • Ms. Adina Popescu
  • Mr. Ippei Shibata

Abstract

This note analyzes the impact of preannounced government spending shocks in the United States on the real effective exchange rate and the trade balance. Using a vector autoregression framework that allows anticipated fiscal shocks to be identified using survey information, we find that preannounced spending shocks lead to a sizable real effective dollar appreciation and a worsening of both the aggregate trade balance and bilateral trade balances in a panel of partner countries. The results are robust to controlling for country-specific variables like the macroeconomic and policy conditions in the recipient countries, are generalized across regions and might have decreased during the zero-interest-lower-bound regime.

Suggested Citation

  • Ms. Adina Popescu & Mr. Ippei Shibata, 2017. "Spillovers from US Government Spending Shocks: Impact on External Positions," IMF Spillover Notes 2017/001, International Monetary Fund.
    • Handle: RePEc:imf:imfsns:2017/001
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    Cited by:

    1. Patrick Blagrave & Giang Ho & Ksenia Koloskova & Mr. Esteban Vesperoni, 2017. "Fiscal Spillovers: The Importance of Macroeconomic and Policy Conditions in Transmission," IMF Spillover Notes 2017/002, International Monetary Fund.

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