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GDP-spillovers in multi-country models

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  • Douven, Rudy
  • Peeters, Marga

Abstract

Spillovers resulting from fiscal and monetary policy are compared and analysed in small static, small dynamic and large dynamic multi-country models. To compare the size of the spillovers, we consider simulations in which GDP for a certain number of years is held one percent above base in the country where the shock originates. The results indicate that spillovers are large in size. An important transmission mechanism in the contribution to foreign GDP is found to be the foreign real interest rate, contributions to foreign GDP generated through trade are found to be small. In empirical models with endogenous exchange and interest rates, it was found that under floating exchange rate regimes spillovers are much smaller than under pegged exchange rate regimes. Furthermore, we note that under floating exchange rate regimes, spillovers seem to be larger in small dynamic models than in large empirical models.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 28506.

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Date of creation: 1998
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Handle: RePEc:pra:mprapa:28506

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Keywords: fiscal shock; monetary shock; multi-country model; GDP; spillover; exhange rate regime; econometric modeling;

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  1. Ghosh, Atish R & Masson, Paul R, 1991. "Model Uncertainty, Learning, and the Gains from Coordination," American Economic Review, American Economic Association, vol. 81(3), pages 465-79, June.
  2. Douven, R. C. & Plasmans, J. E. J., 1996. "SLIM, a small linear interdependent model of eight EU-member states, the USA and Japan," Economic Modelling, Elsevier, vol. 13(2), pages 185-233, April.
  3. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
  4. Helliwell, John F. & Padmore, Tim, 1985. "Empirical studies of macroeconomic interdependence," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 21, pages 1107-1151 Elsevier.
  5. Mitchell, Peter R. & Sault, Joanne E. & Smith, Peter N. & Wallis, Kenneth F., 1998. "Comparing global economic models," Economic Modelling, Elsevier, vol. 15(1), pages 1-48, January.
  6. Papell, D.H., 1988. "Monetary Policy In The Unites States Under Flexible Exchange Rates," Papers 8, Houston - Department of Economics.
  7. repec:sae:niesru:v:112:y::i:1:p:41-52 is not listed on IDEAS
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  1. Savonarola vs Paperoga: decrescita e endogenità delle aree valutarie ottimali
    by Alberto Bagnai in Goofynomics on 2011-12-31 17:42:00
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Cited by:
  1. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 0042, European Central Bank.
  2. Bagnai, Alberto, 2009. "The role of China in global external imbalances: Some further evidence," China Economic Review, Elsevier, vol. 20(3), pages 508-526, September.
  3. Wang, Zheng & Li, Hua-Qun & Wu, Jing & Gong, Yi & Zhang, Huan-Bo & Zhao, Chen, 2010. "Policy modeling on the GDP spillovers of carbon abatement policies between China and the United States," Economic Modelling, Elsevier, vol. 27(1), pages 40-45, January.

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