Multilateral economic cooperation and the international transmission of fiscal policy
By: Giancarlo Corsetti, Gernot J. Müller
Contributors: Müller, Gernot, 1943-; National Bureau of Economic Research
Series: NBER working paper series -- working paper 17708; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17708.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "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 implications of these results for policy coordination when markets price sovereign default risk, and put pressure on governments for implementing budget consolidation measures"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 2/21/2012.

Includes bibliographical references.

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