Fiscal Spillovers in the Euro Area: Letting the Data Speak

Author/Editor:

Era Dabla-Norris ; Pietro Dallari ; Tigran Poghosyan

Publication Date:

November 15, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

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.

Series:

Working Paper No. 17/241

Subject:

English

Publication Date:

November 15, 2017

ISBN/ISSN:

9781484328262/1018-5941

Stock No:

WPIEA2017241

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

50

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