Download or read book Fiscal Spillovers written by Patrick Blagrave and published by International Monetary Fund. This book was released on 2017-10-18 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Are fiscal spillovers today as large as they were during the global financial crisis? How do they depend on economic and policy conditions? This note informs the debate on the cross-border impact of fiscal policy on economic activity, shedding light on the magnitude and the factors affecting transmission, such as the fiscal instruments used, cyclical positions, monetary policy conditions, and exchange rate regimes. The note assesses spillovers from five major advanced economies (France, Germany, Japan, United Kingdom, United States) on 55 advanced and emerging market economies that represent 85 percent of global output, looking at government-spending and tax revenue shocks during expansion and consolidation episodes. It finds that fiscal spillovers are economically significant in the presence of slack and/or accommodative monetary policy—and considerably smaller otherwise, which suggests that spillovers are large when domestic multipliers are also large. It also finds that spillovers from government-spending shocks are larger and more persistent than those from tax shocks and that transmission may be stronger among countries with fixed exchange rates. The evidence suggests that although spillovers from fiscal policies in the current environment may not be as large as they were during the crisis, they may still be important under certain economic circumstances.
Download or read book International Fiscal financial Spillovers The Effect of Fiscal Shocks on Cross border Bank Lending written by Sangyup Choi and published by International Monetary Fund. This book was released on 2019-07-12 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper sheds new light on the degree of international fiscal-financial spillovers by investigating the effect of domestic fiscal policies on cross-border bank lending. By estimating the dynamic response of U.S. cross-border bank lending towards the 45 recipient countries to exogenous domestic fiscal shocks (both measured by spending and revenue) between 1990Q1 and 2012Q4, we find that expansionary domestic fiscal shocks lead to a statistically significant increase in cross-border bank lending. The magnitude of the effect is also economically significant: the effect of 1 percent of GDP increase (decrease) in spending (revenue) is comparable to an exogenous decline in the federal funds rate. We also find that fiscal shocks tend to have larger effects during periods of recessions than expansions in the source country, and that the adverse effect of a fiscal consolidation is larger than the positive effect of the same size of a fiscal expansion. In contrast, we do not find systematic and statistically significant differences in the spillover effects across recipient countries depending on their exchange rate regime, although capital controls seem to play some moderating role. The extension of the analysis to a panel of 16 small open economies confirms the finding from the U.S. economy.
Download or read book International Spillovers from U S Fiscal Policy Shocks written by Stephen Nicar and published by . This book was released on 2016 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: I estimate the effect of U.S. government spending and tax shocks on Canada and the U.K. from 1975 to 2014, and on Japan from 1979 to 2014. Spending and tax shocks are identified using sign restrictions on the impulse responses from a vector autoregression (VAR). I find that spillover effects of expansionary fiscal shocks are not uniform across countries, though for all three countries they result in economically significant GDP increases in the short run. In addition, government spending shocks have larger effects than net tax shocks. Altogether, the results support the idea that some countries may benefit significantly from expansionary U.S. fiscal policy.
Download or read book Spillovers from US Government Spending Shocks written by Ms.Adina Popescu and published by International Monetary Fund. This book was released on 2017-10-18 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: This note analyzes the impact of preannounced government spending shocks in the United States on the real effective exchange rate and the trade balance. Using a vector autoregression framework that allows anticipated fiscal shocks to be identified using survey information, we find that preannounced spending shocks lead to a sizable real effective dollar appreciation and a worsening of both the aggregate trade balance and bilateral trade balances in a panel of partner countries. The results are robust to controlling for country-specific variables like the macroeconomic and policy conditions in the recipient countries, are generalized across regions and might have decreased during the zero-interest-lower-bound regime.
Download or read book Fiscal Policy Shocks and International Spillovers written by Ayobami E. Ilori and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Fiscal Spillovers in the Euro Area Letting the Data Speak written by Ms.Era Dabla-Norris and published by International Monetary Fund. This book was released on 2017-11-15 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate a panel VAR model that captures cross-country, dynamic interlinkages for 10 euro area countries using quarterly data for the period 1999-2016. Our analysis suggests that fiscal spillovers are significant and tend to be larger for countries with close trade and financial links as well, as for fiscal shocks originating from larger countries. The current account appears to be the main channel of transmission, although strong trade integration among countries in the euro area and spillback effects tend to zero-out the net trade impact in some cases. A subsample analysis shows that the effects of fiscal policy have changed over time, with larger estimated domestic multipliers and spillovers between 2011 and 2014.
Download or read book Cross Border Transmission of Fiscal Shocks The Role of Monetary Conditions written by Patrick Blagrave and published by International Monetary Fund. This book was released on 2018-05-09 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Fiscal stimulus was widely advocated during the global crisis, a period characterized by monetary policy constrained by the effective lower bound (ELB) in many countries, in part because of expected positive spillovers. Standard New Keynesian models predict the cross-border transmission of fiscal shocks is stronger when monetary policy is constrained in recipients. However, the empirical evidence is scarce. This paper bridges this gap by looking at the impact of fiscal shocks in systemic (source) economies on output and demand components in a large group of (recipient) countries, under different monetary policy conditions. Empirical results are compared to simulations with a state-of-the-art estimated open-economy New Keynesian model. Our results corroborate model predictions, finding larger spillovers when recipients are at the ELB, driven by stronger responses of investment and consumption relative to normal times
Download or read book Cross Country Spillovers of Fiscal Consolidations in the Euro Area written by Mr.Tigran Poghosyan and published by International Monetary Fund. This book was released on 2017-06-28 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper revisits the issue of cross-country spillovers from fiscal consolidations using an innovative empirical methodology. We find evidence in support of fiscal spillovers in 10 euro area countries. Fiscal consolidation in one country not only reduces domestic output (direct effect), but also the output of other member countries (indirect/spillover effect). Fiscal spillovers are larger for: (i) more closely located and economically integrated countries, and (ii) fiscal shocks originating from relatively larger countries. On average, 1 percent of GDP fiscal consolidation in 10 euro area countries reduces the combined output by 0.6 percent on impact, out of which half is driven by indirect effects from fiscal spillovers. The impact peters out and becomes insignificant over the medium-term. It is largely driven by tax measures, which have a relatively stronger effect on output compared to expenditure measures. The results are robust to alternative measures of bilateral links across countries.
Download or read book Sectoral Shocks and Spillovers An Application to COVID 19 written by Mr. Sonali Das and published by International Monetary Fund. This book was released on 2021-07-30 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the role of sectoral spillovers in propagating sectoral shocks in the broader economy, both in the past and during the COVID-19 pandemic. In particular, we study how shocks that occur within a sector itself and spillovers from shocks to other sectors affect sectoral activity, for a large sample of countries from 1995 to 2014. We find that both supply and demand shocks—measured as changes in, respectively, productivity and government purchases at the sector level—have large spillover effects on sector-level gross value added and on a sector’s share of the economy. We then use these historical estimates, together with the network structure of global production, to quantify the spillovers from the economic shock associated with the pandemic. We find spillover effects to be sizeable, making up a significant fraction of the overall decline in activity in 2020.Our results have implications for the design of policies with a sectoral dimension.
Download or read book Production Networks and International Fiscal Spillovers written by Michael B. Devereux and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Fiscal Policy and Long Term Growth written by International Monetary Fund and published by International Monetary Fund. This book was released on 2015-04-20 with total page 257 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.
Download or read book U S Monetary Policy Shock Spillovers Evidence from Firm Level Data written by Ms. Elif C Arbatli Saxegaard and published by International Monetary Fund. This book was released on 2022-09-16 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine three main channels through which U.S. monetary policy shocks affect firm investment in foreign countries: (1) the balance sheet channel; (2) the financial channel of the exchange rate; and (3) the trade channel. For this purpose, we use quarterly firm-level data for 63 advanced economies (AEs) and emerging market and developing economies (EMDEs) over 1996-2016. Our results suggest an important and independent role for all three key channels. U.S. monetary policy shocks have larger effects on investment for firms that are more leveraged (balance sheet channel), for firms that have a higher share of debt in foreign currency (financial channel of the exchange rate), and for firms that operate in sectors with higher export dependence (trade channel). Back-of-the-envelope calculations suggest that the balance sheet channel is the most important channel of transmission of U.S. monetary policy shocks on aggregate firm investment.
Download or read book Policy Mix and the US Trade Balance written by Gustavo Adler and published by International Monetary Fund. This book was released on 2017-09-20 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: The strong US policy response to the 2008-09 financial crisis raised concerns about its impact (spillovers) on other countries, with great focus on the monetary stimulus but little attention to fiscal policy, despite their combined deployment. Using a sign-restricted structural VAR approach, we study the trade spillovers of the post-crisis policy mix, by assessing the joint impact of monetary and fiscal policy. We find that aggregate trade effects, as reflected in the trade balance, varied across time, reflecting the different timing of fiscal and monetary stimuli, with overall positive spillovers in the immediate aftermath of the crisis. At the same time, reflecting the different transmission mechanisms of monetary policy, we find that the effects differed greatly between trading partners with fixed and flexible exchange rates. In general, our results highlight (i) the importance of studying fiscal and monetary policy spillovers jointly in order to avoid attenuation bias from omitted variables; and (ii) that trading partners’ exchange rate regimes are of first order importance in determining the impact of policy spillovers.
Download or read book Fiscal Policy after the Financial Crisis written by Alberto Alesina and published by University of Chicago Press. This book was released on 2013-06-25 with total page 596 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent recession has brought fiscal policy back to the forefront, with economists and policy makers struggling to reach a consensus on highly political issues like tax rates and government spending. At the heart of the debate are fiscal multipliers, whose size and sensitivity determine the power of such policies to influence economic growth. Fiscal Policy after the Financial Crisis focuses on the effects of fiscal stimuli and increased government spending, with contributions that consider the measurement of the multiplier effect and its size. In the face of uncertainty over the sustainability of recent economic policies, further contributions to this volume discuss the merits of alternate means of debt reduction through decreased government spending or increased taxes. A final section examines how the short-term political forces driving fiscal policy might be balanced with aspects of the long-term planning governing monetary policy. A direct intervention in timely debates, Fiscal Policy after the Financial Crisis offers invaluable insights about various responses to the recent financial crisis.
Download or read book Financial Crisis US Unconventional Monetary Policy and International Spillovers written by Qianying Chen and published by International Monetary Fund. This book was released on 2015-04-29 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the impact of the US quantitative easing (QE) on both the emerging and advanced economies, estimating a global vector error-correction model (GVECM) and conducting counterfactual analyses. We focus on the effects of reductions in the US term and corporate spreads. First, US QE measures reducing the US corporate spread appear to be more important than lowering the US term spread. Second, US QE measures might have prevented episodes of prolonged recession and deflation in the advanced economies. Third, the estimated effects on the emerging economies have been diverse but often larger than those recorded in the US and other advanced economies. The heterogeneous effects from US QE measures indicate unevenly distributed benefits and costs.
Download or read book Network Effects of International Shocks and Spillovers written by Mr.Alexei Kireyev and published by International Monetary Fund. This book was released on 2015-07-07 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes a method for assessing international spillovers from nominal demand shocks. It quantifies the impact of a shock in one country on all other countries. The paper concludes that the network effects in shock spillovers can be substantial, comparable, and often exceed the initial shock. Individual countries may amplify, absorb, or block spillovers. Most developed countries pass-through shocks, whereas low-income countries and oil exporters tend to block shock spillovers. The method is used to study demand shocks originating from a large and medium country, China and Ukraine respectively.
Download or read book Essays on International Repercussions of Fiscal Policy and the Analysis of Migration Restrictions written by Jingchao Li and published by . This book was released on 2015 with total page 107 pages. Available in PDF, EPUB and Kindle. Book excerpt: Chapter 1 of my dissertation, "Fiscal Shocks and Cross-Border Spillovers", develops an open economy DSGE model to analyze the cross-border spillovers from expansionary shocks to government spending, lump-sum transfers and distortionary taxes on labor income, capital income and consumption. First, I present a new empirical fact regarding the negative relation between a country's output spillover from government spending shocks and its domestic government debt-to-GDP ratio. Second, I show that the model can rationalize this negative relationship in the presence of a fiscal consolidation regime, i.e. an increase in government debt gives rise to higher tax rates along with reductions in spending and transfers. The key mechanism is that a slower speed of fiscal consolidation is associated with larger accumulations of government debt and higher global interest rates, which dampens foreign activity. Finally, I find long-run spillover effects of fiscal shocks to be substantially different from short-run effects.
