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Fiscal Policy Spillovers through Trade Openness

Author

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  • Karras, Georgios

    (University of Illinois at Chicago)

Abstract

This paper studies whether trade openness reduces the domestic fiscal multiplier, but increases the impacts of foreign fiscal shocks, i.e., the spillover effect, as suggested by theory. Using annual data from the period of 1970 to 2011, for 179 developed and developing economies, we show that domestic fiscal shocks are less potent in more open economies, while foreign (rest of the world) fiscal shocks are more potent in more open economies.

Suggested Citation

  • Karras, Georgios, 2014. "Fiscal Policy Spillovers through Trade Openness," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 29, pages 563-581.
    • Handle: RePEc:ris:integr:0641
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    More about this item

    Keywords

    Fiscal Policy; Fiscal Multiplier; Fiscal Spillover Effects; Trade Openness;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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