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Journal of Economic Integration 2014 September;29(3) :563-581.
DOI: https://doi.org/10.11130/jei.2014.29.3.563
Fiscal Policy Spillovers through Trade Openness
Georgios Karras 
University of Illinois at Chicago, Chicago, Illinois, USA
Corresponding Author: Georgios Karras ,Tel: +312 9962321, Fax: +312 9963344, Email: gkarras@uic.edu
Copyright ©2014 Journal of Economic Integration
ABSTRACT
This paper studies whether trade openness reduces the domestic fiscal multiplier, but increases the impacts of foreign fiscal shocks, i.e., the spillover effect, as suggested by theory. Using annual data from the period of 1970 to 2011, for 179 developed and developing economies, we show that domestic fiscal shocks are less potent in more open economies, while foreign (rest of the world) fiscal shocks are more potent in more open economies.

JEL Classification
E32: Business Fluctuations; Cycles
E62: Fiscal Policy
Keywords: Fiscal Policy | Fiscal Multiplier | Fiscal Spillover Effects | Trade Openness
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