Fiscal Stimulus in a Monetary Union: Evidence from Eurozone Regions

43 Pages Posted: 22 Nov 2016

See all articles by Maria Coelho

Maria Coelho

University of California, Berkeley, College of Letters & Science, Department of Economics

Date Written: April 15, 2016

Abstract

This paper contributes to the open economy local fiscal multiplier literature by estimating regional output and employment responses to federal expenditure shocks in the European Union. In particular, similarly to the literature on foreign aid and growth, I use shocks to the supply of federal transfers (European Commission commitments) of structural fund spending by subnational region as instruments for annual realized expenditure in a panel from 2000-2013. I find a large, contemporaneous multiplier of 1.7 which translates into a cumulative multiplier of 4 three years after the shock. Furthermore, using a novel dataset on bilateral trade between EU regions, I find evidence of demand-driven spillovers up to three years after a shock.

Keywords: Fiscal multiplier, structural funds, monetary union

JEL Classification: E62, F45, F40

Suggested Citation

Coelho, Maria, Fiscal Stimulus in a Monetary Union: Evidence from Eurozone Regions (April 15, 2016). Available at SSRN: https://ssrn.com/abstract=2873276 or http://dx.doi.org/10.2139/ssrn.2873276

Maria Coelho (Contact Author)

University of California, Berkeley, College of Letters & Science, Department of Economics ( email )

Berkeley, CA
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
61
Abstract Views
470
rank
414,484
PlumX Metrics