Measuring Fiscal Spillovers in EMU and Beyond: A Global VAR Approach
CEPS Working Document No. 428 / December 2016
49 Pages Posted: 4 Oct 2017
Date Written: December 16, 2016
Abstract
This paper identifies and measures fiscal spillovers in the EU countries empirically using a global vector autoregression (GVAR) model. Our aim is to look at the sign and the absolute values of fiscal spillovers in a country-wise perspective and at the time profile (impulse response) of the impacts of fiscal shocks. We find moderate spillover effects of fiscal policy shocks originating in Germany and France. However, there is significant variation regarding magnitude of the spillovers among destination countries and country clusters. Furthermore, we find some evidence that spillovers generated by German or French fiscal spillovers are stronger for EMU than non-EMU countries in Europe.
Keywords: EMU Versus Rest of Europe, Fiscal Policy Coordination, Fiscal Spillovers, GVAR Analysis, Regional Shocks, Impulse Response Analysis, Trade Weights
JEL Classification: C50, E61, F15, F42, H60
Suggested Citation: Suggested Citation