Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154426
Authors: 
Montinari, Letizia
Stracca, Livio
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper 1993
Abstract: 
In this paper we investigate how income growth rates in one country are affected by growth rates in partner countries, testing for the importance of pairwise country links as well as characteristics of the receiving country (trade and financial openness, exchange rate regime, fiscal variables). We find that trade integration fosters the spill-over of business cycles, both bilaterally and as a country characteristic (trade openness). Results for financial integration are mixed; financial links as pairwise country characteristic are either insignificant or negatively signed (indicating a dampening of cross country spill-overs), but financial openness as characteristic of the receiving country amplifies spill-overs. We find no evidence for a role of the exchange rate regime. Finally, we find that higher government spending and debt reduces countries’ vulnerability to foreign business cycles, presumably through the effect of automatic stabilisers.
Subjects: 
FDI
financial integration
gravity
growth spillovers
multi-country models
trade integration
JEL: 
F1
F3
F41
F44
Document Type: 
Working Paper

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