Munich Personal RePEc Archive

Broad Dollar Shocks and Economic Activity in Trade-Heavy Countries: The Role of Government Size

Ibhagui, Oyakhilome and Olarewaju, Favour (2020): Broad Dollar Shocks and Economic Activity in Trade-Heavy Countries: The Role of Government Size.

[img]
Preview
PDF
MPRA_paper_100944.pdf

Download (1MB) | Preview

Abstract

This paper investigates how government size influences the responses of government expenditure and economic growth to broad dollar shocks in 155 trade-heavy countries across 6 continents from 1995 to 2019. In most cases, we document that the magnitude of contractions in expenditures and economic growth from broad dollar appreciations depends on the size of government. Countries with large governments experience a more severe negative impact from dollar appreciations than countries with smaller governments and this is true for different expenditure types: total, current and capital government expenditures. Accordingly, government size plays a role in the disparities observed in the responses of expenditure and growth to broad dollar shocks across these countries.

Logo of the University Library LMU Munich
MPRA is a RePEc service hosted by
the University Library LMU Munich in Germany.