Fiscal Spillovers in the Euro Area: Letting the Data Speak

51 Pages Posted: 1 Feb 2018

See all articles by Era Dabla-Norris

Era Dabla-Norris

International Monetary Fund (IMF)

Pietro Dallari

International Monetary Fund (IMF); European Central Bank (ECB)

Tigran Poghosyan

International Monetary Fund (IMF)

Date Written: November 2017

Abstract

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.

Keywords: Vector autoregression, Spillovers, Fiscal policy, Fiscal stimulus and multipliers, Italy, Spain, Austria, Portugal, France, Finland, Netherlands, Ireland, Belgium, Germany, Euro Area, Fiscal Spillovers; Bayesian Methods; Fiscal Multipliers, Panel VAR, Fiscal Spillovers, Bayesian Methods, Fiscal Multipliers, Bayesian Analysis, Models with Panel Data

JEL Classification: C11, C33, E62

Suggested Citation

Dabla-Norris, Era and Dallari, Pietro and Poghosyan, Tigran, Fiscal Spillovers in the Euro Area: Letting the Data Speak (November 2017). IMF Working Paper No. 17/241, Available at SSRN: https://ssrn.com/abstract=3116199

Era Dabla-Norris (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Pietro Dallari

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Tigran Poghosyan

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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