Fiscal policy, net exports, and the sectoral composition of output in Greece

Abstract

This paper investigates the effects of fiscal policy shocks on net export performance and the sectoral composition of output in Greece in the post 2000 period. A reduction in government spending (or a tax hike) exerts a negative response on output which reduces import demand. A cut back in government spending boosts exports through the labour cost competitiveness channel further improving net exports. Tax hikes in particular on social security contributions and other indirect taxes reduce export performance. Although real aggregate output declines following a cut in government spending, the tradable sector output responds positively, further improving net exports.

External competitiveness and the role of fiscal policy: does fiscal austerity matter?

“…The duration effect is the same (4 years), but it is stronger in the case of government purchases, the change of which is the only important instrument of fiscal policy when it comes to exports. Again, the results confirm the conclusion by [6,8,21,30].…”

“…These results are in line with Marato and Mulas Granados [21] who emphasize the expenditure based fiscal austerity approach and also with Ali Abbas et al [2] who find a stronger current account response to fiscal policy changes in the emerging countries. The same effects for increases in government spending are reported in [7,8,14], while Beetsma et al [6] and Tagkalakis [30] find the same effects for government purchases in the case of the ten EU countries and Greece. The same analysis was then performed on two subsamples: a group of countries with the flexible exchange rate and for the countries with the fixed exchange rate regime.…”

“…Data for exports (volume of exports measured as a percentage of GDP; the variable EXPORT), government purchases (in mil EUR, the variable GP) and net taxes (in mil EUR, the variable NT) are obtained from Eurostat. Taking into consideration the study on Greece conducted by [30], our main interest also focuses on two variables under the influence of fiscal policy.…”

Sectoral Impact of Fiscal Policy in Malaysia

“…In fact, most of the relevant empirical studies about Malaysia discuss the fiscal multiplier in Malaysia and the reactions of economic variables at an aggregate level to a fiscal policy shock. The impact of fiscal policy on the sectoral output was examined by Tagkalakis (2014) and Monacelli and Perotti (2008). They examined the data of traded and non-traded goods in Greece and the United States, respectively.…”

Net Exports of the European Post-Transition Countries: The Dynamic Factor Approach

“…Raff o (2008) showed that trade fl uctuations were driven by consumption smoothing while generating pro-cyclical net trade in goods. Tagkalakis (2015) examined the case of Greece in the post 2000 period and found that a cut back in government spending boosts exports through the labour cost competitiveness channel further improving net exports. Prilepskiy (2017) analysed the case of Russia and demonstrated that in the medium term, low quality of the institutional environment in Russia hinders maintaining momentum for exports and import substitution associated with the depreciation.…”