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Regional fiscal spillovers: The role of trade linkages

Author

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  • Bettarelli, Luca
  • Furceri, Davide
  • Pizzuto, Pietro
  • Yarveisi, Khatereh

Abstract

This paper examines how fiscal shocks in a given country affect foreign regions through regional trade linkages. Applying the local projection method to a panel of 222 NUTS-2 regions in 20 European countries during the period 1993–2020, we find that countries-to-regions fiscal spillovers are positive, statistically significant, persistent, and non-negligible in size. In addition, fiscal spillovers tend to be larger when the recipient region experiences a recession, when monetary policy of the recipient country is at the zero-lower-bound, and when the recipient region and the source country are both part of the European Monetary Union.

Suggested Citation

  • Bettarelli, Luca & Furceri, Davide & Pizzuto, Pietro & Yarveisi, Khatereh, 2024. "Regional fiscal spillovers: The role of trade linkages," Journal of International Money and Finance, Elsevier, vol. 140(C).
    • Handle: RePEc:eee:jimfin:v:140:y:2024:i:c:s0261560623001961
    DOI: 10.1016/j.jimonfin.2023.102995
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    More about this item

    Keywords

    Fiscal shocks; Fiscal spillovers; Regional trade; Regional spillovers;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F19 - International Economics - - Trade - - - Other
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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