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Broad Dollar Shocks and Economic Activity in Trade-Heavy Countries: The Role of Government Size

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Listed:
  • Ibhagui, Oyakhilome
  • Olarewaju, Favour

Abstract

This paper investigates how government size influences the responses of government expenditure and economic growth to broad dollar shocks in 155 trade-heavy countries across 6 continents from 1995 to 2019. In most cases, we document that the magnitude of contractions in expenditures and economic growth from broad dollar appreciations depends on the size of government. Countries with large governments experience a more severe negative impact from dollar appreciations than countries with smaller governments and this is true for different expenditure types: total, current and capital government expenditures. Accordingly, government size plays a role in the disparities observed in the responses of expenditure and growth to broad dollar shocks across these countries.

Suggested Citation

  • Ibhagui, Oyakhilome & Olarewaju, Favour, 2020. "Broad Dollar Shocks and Economic Activity in Trade-Heavy Countries: The Role of Government Size," MPRA Paper 100944, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:100944
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    References listed on IDEAS

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    More about this item

    Keywords

    Dollar Shocks; Economic Growth; Government Expenditure; Trade-heavy Countries;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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