Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161666
Authors: 
Davione, Thomas
Molnar, Matthias
Year of Publication: 
2017
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 329
Abstract: 
We investigate cross-country fiscal policy spillovers through the integration of capital markets in a currency union and allow capital use in production to differ across countries. Following empirical evidence, we assume that production exhibits capital-skill complementarity. Using a multi-country overlapping-generations model calibrated for 14 European Union countries, we find that output spillovers are small with standard tax reforms but can be sizeable with large government spending increases financed by taxes: long run output losses in shock-free countries can amount to a quarter of the losses in countries hit by the spending shock. Conditional and temporary relaxing of the EU debt ceiling rule could benefit the Union as a whole.
Subjects: 
spillovers
fiscal policy
capital-skill complementarity
multi-country modeling
computable general equilibrium
JEL: 
C68
E62
F21
F45
Document Type: 
Working Paper

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