NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Gernot Müller

University of Tuebingen and CEPR
Mohlstr. 36,
72074 Tuebingen,
Germany

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NBER Working Papers and Publications

December 2013Multilateral Economic Cooperation and the International Transmission of Fiscal Policy
with Giancarlo Corsetti
in Globalization in an Age of Crisis: Multilateral Economic Cooperation in the Twenty-First Century, Robert C. Feenstra and Alan M. Taylor, editors
December 2011Multilateral Economic Cooperation and the International Transmission of Fiscal Policy
with Giancarlo Corsetti: w17708
During the global financial crisis 2007-2009 fiscal policy was widely used as a stabilization tool. Policymakers allowed a large build-up of public debt resulting from both automatic and discretionary expansionary measures. At the same time, calls for policy coordination stressed that international spillovers of fiscal policy might be sizeable. We reconsider the case for fiscal coordination by providing new evidence on the cross-border effects of discretionary fiscal measures. We rely on a vector autoregression model as well as on a quantitative business cycle model. We find that i) large spillover effects cannot be ruled out and, in contrast to conventional wisdom, ii) financial factors rather than trade flows lie at the heart of the international transmission mechanism. We discuss the im...

Published: Multilateral Economic Cooperation and the International Transmission of Fiscal Policy, Giancarlo Corsetti, Gernot J. Müller. in Globalization in an Age of Crisis: Multilateral Economic Cooperation in the Twenty-First Century, Feenstra and Taylor. 2014

 
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