Open Economies Review

, Volume 21, Issue 3, pp 335–350

Fiscal Shocks and The Sectoral Composition of Output

Research Article

DOI: 10.1007/s11079-009-9161-5

Cite this article as:
Bénétrix, A.S. & Lane, P.R. Open Econ Rev (2010) 21: 335. doi:10.1007/s11079-009-9161-5

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.

Keywords

Government spending shocks Tradables Nontradables European Monetary Union Panel VAR 

JEL Classification

E24 E62 

Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Department of Economics and IIISTrinity College DublinDublinIreland
  2. 2.CEPRLondonUK

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