Work

Production structure, tradability and fiscal spending multipliers

Year: 2023

Type: article

Abstract: We assess the role that nontradable goods play as a determinant of fiscal spending multipliers, making use of a two-sector model. While fiscal multipliers increase with the share of nontradable goods, an inverted U-shaped relationship exists between multiplier size and the import share. Employing an interacted panel VAR model for EU countries, we estimate the effect of the share of nontradable goods on fiscal spending multipliers. Our empirical results provide strong evidence for the predictions of the theoretical model. They imply that the drag of fiscal consolidations is on average smaller in countries with a low share of nontradable goods.

Source: Journal of International Money and Finance

DOI: 10.1016/j.jimonfin.2023.102921

Authors: Jesús Crespo Cuaresma, Christian Glocker

Institutions: Vienna University of Economics and Business, Austrian Institute of Economic Research, International Institute for Applied Systems Analysis

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,820

Funder: Oesterreichische Nationalbank