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Fiscal spillovers through informal financial channels

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  • Kennedy, Austin

Abstract

This paper examines fiscal policy spillovers through informal international financial channels, using the US stimulus checks as a positive, sudden, and direct fiscal shock. I utilize granular, transaction-level cryptocurrency data combined with an algorithm to probabilistically identify cross-border “crypto vehicle" transactions to construct bilateral cryptocurrency flows between countries. Using a difference-in-differences strategy, I compare cryptocurrency outflows between the US and other high-income countries and find a sharp but temporary increase in cryptocurrency outflows as a result of the direct stimulus. I quantify the fiscal spillover relative to expenditure and place an upper bound of 2.52 % through this channel. This implies that fiscal spillovers through remittance channels are likely modest in size.

Suggested Citation

  • Kennedy, Austin, 2025. "Fiscal spillovers through informal financial channels," Journal of International Money and Finance, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:jimfin:v:157:y:2025:i:c:s0261560625001135
    DOI: 10.1016/j.jimonfin.2025.103378
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    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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