Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/226243 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8541
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
We assess the role that nontradable goods play as a determinant of fiscal spending multipliers, making use of a two-sector model. While fiscal multipliers increase with the share of nontradable goods, an inverted U-shaped relationship exists between multiplier size and the import share. Employing an interacted panel VAR model for EU countries, we estimate the effect of the share of nontradable goods on fiscal spending multipliers. Our empirical results provide strong evidence for the predictions of the theoretical model. They imply that the drag of fiscal consolidations is on average smaller in countries with a low share of nontradable goods.
Subjects: 
fiscal spending multiplier
nontradable goods
openness
DSGE model
interacted panel VAR model
JEL: 
E62
F41
C23
Document Type: 
Working Paper
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