Cross-country evidence on determinants of fiscal policy effectiveness: the role of trade and capital flows

Wierzbowska, Agata; Shibamoto, Masahiko

doi:10.1080/00036846.2018.1430332

Cited by 6 publications

(2 citation statements)

References 23 publications

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“…In addition to this, Wierzbowska and Shibamoto (2018) figured out that capital flows, especially foreign direct investment, play an important role in determining the sizes of fiscal multipliers. Koh (2017) confirms the findings of other studies and implies that fiscal multipliers are larger during periods of low public debt, in periods of the financial crisis and economic downturn, and more developed countries.…”

Section: Perottimentioning

confidence: 99%

Is There Asymmetry in the Relationship Between Government Consumption Dynamics and Economic Activity? Evidence From G7 Economies

Senekovič

2021

Naše Gospodarstvo/Our Economy

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In this paper, based on a quarterly dataset of G7 countries with the application of a nonlinear ARDL model we test for the presence of a short-run and long-term asymmetry in the relationship between government spending and economic activity. The main aim of this study is to analyze the relationship between government spending and economic activity in two separate scenarios, first, in periods when government spending increases and, second, in periods when government spending decreases. Our key findings are, first, the linear model that produces a positive relationship between government consumption and economic activity. Second, in the nonlinear model, more than half of the short-run and long-run coefficients are statistically significant. Third, short-run and long-run asymmetry are detected in four out of seven cases with recognized short-run asymmetry also in the remaining three cases based on graphical analysis. Finally, a negatively inclined short-run asymmetry is detected. The results thus imply a stronger output effect in periods of declining dynamics in government consumption. Future research should be focused on broadening the sample countries and model by adding additional variables.

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Section: Perottimentioning

confidence: 99%

Is There Asymmetry in the Relationship Between Government Consumption Dynamics and Economic Activity? Evidence From G7 Economies

Senekovič

2021

Naše Gospodarstvo/Our Economy

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“…Ilzetzki et al (2013) analyse the determinants of differences in the size of fiscal multipliers across countries and show that, among others, the openness to trade is an important factor explaining the variation observed in fiscal multipliers across economies. More recently, Wierzbowska and Shibamoto (2018) identify net capital inflows and openness to trade as two of the most important determinants of fiscal policy effectiveness, while Cacciatore and Traum (2018) highlight that the domestic effectiveness of fiscal policy can be larger in economies more open to trade, irrespective of the trade balance dynamics. Devereux et al (2019) show that network structures may play a central role in the international propagation of fiscal shocks, particularly when wages are slow to adjust.…”

Section: Introductionmentioning

confidence: 99%