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Do Fiscal Spillovers Matter?

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Author Info

  • Sebastian Weber
  • Anna Ivanova

Abstract

The paper assesses the impact of fiscal spillovers on growth in the context of a coordinated exit from crisis management policies. We find that despite potentially sizeable domestic effects from consolidation, aggregate negative spillovers to other countries are likely to be contained in 2011-2012 unless fiscal multipliers and/or imports elasticities are very large. Small and open European economies, however, will be substantially affected in any case. In contrast, the coordinated exit from fiscal stimulus will have limited direct effect on European peripheral countries since they are relatively closed, with the notable exception of Ireland.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/211.

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Length: 43
Date of creation: 01 Sep 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/211

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Keywords: Spillovers; Economic growth; Economic models; Fiscal consolidation; fiscal policy; fiscal changes; fiscal measure; fiscal multipliers; fiscal spending; government spending; fiscal change; fiscal stance; fiscal stimulus; interest rates; fiscal contribution; fiscal expansion; fiscal shock; fiscal policies; government spending multipliers; fiscal balance; fiscal position; lead; fiscal measures; fiscal shocks; tax changes; discretionary fiscal policy; fiscal plans; fiscal action; aggregate fiscal; tax cuts; fiscal space; fiscal positions; fiscal consolidation on growth; fiscal stimuli; tax cut; change in expenditures; fiscal policy on consumption; fiscal expenditure; fiscal adjustment; fiscal plan; public spending; government expenditures; fiscal stances; expansionary fiscal; fiscal variable; expenditure cuts; fiscal variables; fiscal impulse; fiscal patterns; budget balances; size of multipliers; government spending shocks; fiscal impulses; fiscal effort; tax increase; fiscal contraction; tax increases; fiscal multiplier; public debt; increase in expenditures; revenue adjustment; tax revenues; fiscal deficits;

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References

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  1. Almunia, Miguel & Bénétrix, Agustín & Eichengreen, Barry & O Rourke, Kevin H. & Rua, Gisela, 2009. "From Great Depression to Great Credit Crisis: Similarities, Differences and Lessons," CEPR Discussion Papers 7564, C.E.P.R. Discussion Papers.
  2. Roel Beetsma & Massimo Giuliodori & Franc Klaassen, 2005. "Trade Spillovers of Fiscal Policy in the European Union: A Panel Analysis," EUI-RSCAS Working Papers 31, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  3. Agnès Bénassy-Quéré & Jacopo Cimadomo, 2006. "Changing Patterns of Domestic and Cross-Border Fiscal Policy Multipliers in Europe and the US," Working Papers 2006-24, CEPII research center.
  4. John F. Cogan & Tobias Cwik & John B. Taylor & Volker Wieland, 2009. "New Keynesian versus Old Keynesian Government Spending Multipliers," NBER Working Papers 14782, National Bureau of Economic Research, Inc.
  5. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import Demand Elasticities and Trade Distortions," CEPR Discussion Papers 4669, C.E.P.R. Discussion Papers.
  6. Nathalie Girouard & Christophe André, 2005. "Measuring Cyclically-adjusted Budget Balances for OECD Countries," OECD Economics Department Working Papers 434, OECD Publishing.
  7. Tagkalakis, Athanasios, 2008. "The effects of fiscal policy on consumption in recessions and expansions," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1486-1508, June.
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Citations

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Cited by:
  1. Bornhorst, Fabian & Mody, Ashoka, 2012. "Test of the German resilience," CFS Working Paper Series 2012/14, Center for Financial Studies (CFS).
  2. Athanasios O. Tagkalakis, 2013. "Discretionary fiscal policy and economic activity in Greece," Working Papers 169, Bank of Greece.
  3. Selim Elekdag & Dirk Muir, 2013. "Trade Linkages, Balance Sheets, and Spillovers," IMF Working Papers 13/210, International Monetary Fund.
  4. Fabian Bornhorst & Ashoka Mody, 2012. "Tests of German Resilience," IMF Working Papers 12/239, International Monetary Fund.
  5. Luigi Bonatti & Andrea Fracasso, 2013. "The German Model and the European Crisis," Journal of Common Market Studies, Wiley Blackwell, vol. 51(6), pages 1023-1039, November.

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