International spillovers from U.S. fiscal policy shocks

Nicar, Stephen (2014): International spillovers from U.S. fiscal policy shocks. Forthcoming in: Open Economies Review

Abstract

I estimate the effect of U.S. government spending and tax shocks on Canada and the U.K. from 1975 to 2014, and on Japan from 1979 to 2014. Spending and tax shocks are identified using sign restrictions on the impulse responses from a vector autoregression (VAR). I find that spillover effects of expansionary fiscal shocks are not uniform across countries, though for all three countries they result in economically significant GDP increases in the short run. In addition, government spending shocks have larger effects than net tax shocks. Altogether, the results support the idea that some countries may benefit significantly from expansionary U.S. fiscal policy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fiscal policy, International Transmission, Spillovers, VAR models, Sign Restriction
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F42 - International Policy Coordination and Transmission

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