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Fiscal Shocks and The Sectoral Composition of Output

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  • Agustín Bénétrix

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  • Philip Lane

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Abstract

We study the impact of shocks to different types of government spending on the composition of sectoral output for a panel of EMU member countries. We find that fiscal shocks lead to an increase in the relative size of the nontraded sector. There is typically no significant impact on the level of production in the tradables sector but the level of imports increases and the level of exports declines in most cases. Overall, the results show that fiscal shocks matter not only for aggregate variables but also for the sectoral composition of output.
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Suggested Citation

  • Agustín Bénétrix & Philip Lane, 2010. "Fiscal Shocks and The Sectoral Composition of Output," Open Economies Review, Springer, vol. 21(3), pages 335-350, July.
  • Handle: RePEc:kap:openec:v:21:y:2010:i:3:p:335-350
    DOI: 10.1007/s11079-009-9161-5
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    Citations

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    as


    Cited by:

    1. Philip R. Lane, 2013. "External imbalances and macroeconomic policy," New Zealand Economic Papers, Taylor & Francis Journals, vol. 47(1), pages 53-70, April.
    2. Athanasios Tagkalakis, 2015. "Fiscal policy, net exports, and the sectoral composition of output in Greece," International Economics and Economic Policy, Springer, vol. 12(4), pages 521-539, October.
    3. Steinar Holden & Victoria Sparrman, 2011. "Do Government Purchases Affect Unemployment?," CESifo Working Paper Series 3482, CESifo Group Munich.
    4. repec:kap:openec:v:28:y:2017:i:4:d:10.1007_s11079-017-9433-4 is not listed on IDEAS
    5. Benetrix, Agustin & Lane, Philip R., 2009. "The Impact of Fiscal Shocks on the Irish Economy," The Economic and Social Review, Economic and Social Studies, vol. 40(4), pages 407-434.
    6. Olivier Cardi & Romain Restout, 2014. "Unanticipated vs. Anticipated Tax Reforms in a Two-Sector Open Economy," Open Economies Review, Springer, vol. 25(2), pages 373-406, April.
    7. Athanasios Tagkalakis, 2014. "Discretionary fiscal policy and economic activity in Greece," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(4), pages 687-712, November.
    8. Wesselbaum, Dennis, 2015. "Sectoral labor market effects of fiscal spending," Structural Change and Economic Dynamics, Elsevier, vol. 34(C), pages 19-35.
    9. Olivier Cardi & Romain Restout, 2011. "Fiscal shocks in a two sector open economy," Working Papers hal-00567855, HAL.
    10. Hope, David, 2016. "Estimating the effect of the EMU on current account balances: A synthetic control approach," European Journal of Political Economy, Elsevier, vol. 44(C), pages 20-40.
    11. Anthony J. Makin, 2013. "The policy (in)effectiveness of government spending in a dependent economy," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 16(3), pages 287-301, September.
    12. Amy K. Filipek & Till Schreiber, 2010. "The Stability and Growth Pact: Past Performance and Future Reforms," Working Papers 97, Department of Economics, College of William and Mary.
    13. Philip Lane, 2010. "Some Lessons for Fiscal Policy from the Financial Crisis," The Institute for International Integration Studies Discussion Paper Series iiisdp334, IIIS.
    14. Philip Lane, 2010. "External Imbalances and Fiscal Policy," The Institute for International Integration Studies Discussion Paper Series iiisdp314, IIIS.
    15. Eiji Fujii, 2017. "Government Size, Trade Openness, and Output Volatility: A Case of fully Integrated Economies," Open Economies Review, Springer, vol. 28(4), pages 661-684, September.

    More about this item

    Keywords

    Government spending shocks; Tradables; Nontradables; European Monetary Union; Panel VAR; E24; E62;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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