Fiscal Policy Spillovers in a Monetary Union

We examine, within a monetary union framework, cross-country spillovers arising from government consumption and government investment, conditional on active and passive monetary policy. To do so, we use two models from different classes, a DSGE model and a traditional structural model. The main finding is that expansionary fiscal shocks in the rest of the euro area can lead to non-negligible spillovers to the Irish economy, in particular if the monetary policy stance is supportive. In this case, spillovers lead to a stimulus that increases the fiscal space of the country with positive spillovers. 

Author: Matija; Graeme, Lozej; Walsh
Volume: 2022.03
Publisher: INFER
Year: 2022
No. of pages: 5
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