Fiscal Shocks and The Sectoral Composition of Output |
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Authors: | Agustín S Bénétrix Philip R Lane |
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Institution: | (1) Department of Economics and IIIS, Trinity College Dublin, Dublin, Ireland;(2) CEPR, London, UK |
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Abstract: | We study the impact of shocks to different types of government spending on the sectoral composition of output for a panel
of EMU member countries. We find that fiscal shocks lead to an increase in the relative size of the nontraded sector, with
the impact varying across the different spending categories. There is typically no significant impact on the level of production
in the tradables sector but the level of imports increases and the level of exports declines in most cases. Overall, the results
show that fiscal shocks matter not only for aggregate variables but also for the sectoral composition of output. The sectoral
output results are consistent with previous work concerning the impact of fiscal shocks on the real exchange rate and the
relative price of nontradables. |
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Keywords: | |
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