Spillovers resulting from fiscal and monetary policy are compared and analysed in small static, small dynamic and large dynamic multi-country models. To compare the size of the spillovers, we consider simulations in which GDP for a certain number of years is held one percent above base in the country where the shock originates. The results indicate that spillovers are large in size. An important transmission mechanism in the contribution to foreign GDP is found to be the foreign real interest rate, contributions to foreign GDP generated through trade are found to be small. In empirical models with endogenous exchange and interest rates, it was found that under floating exchange rate regimes spillovers are much smaller than under pegged exchange rate regimes. Furthermore, we note that under floating exchange rate regimes, spillovers seem to be larger in small dynamic Ž . models than in large empirical models

Additional Metadata
Keywords Multi-country model, International spillovers, Evaluation and simulation
JEL Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation (jel E62), Open Economy Macroeconomics (jel F41), Model Evaluation and Testing (jel C52)
Persistent URL dx.doi.org/10.1016/S0264-9993(97)00026-6, hdl.handle.net/1765/116020
Journal Economic Modelling
Citation
Douven, R.C.H.M, & Peeters, M.C. (1998). GDP-spillovers in multi-country models. Economic Modelling, 15(2), 163–195. doi:10.1016/S0264-9993(97)00026-6