Trans-Tasman Transmission of Government Spending Shocks
Document Type
Article
Source of Publication
Australian Economic Papers
Publication Date
12-1-2012
Abstract
This paper investigates the international transmission of fiscal shocks between two closely-linked, open economies. We estimate impulse response functions using a semi-structural vector auto regressive (VAR) model and quarterly data from Australia and New Zealand for the period 1973:3-2008:4. We compare our empirical results with impulse response functions from a calibrated two-country international real business cycle model with habit formation and adjustment costs to investment. We show that a positive shock to Australian government consumption leads to an increase in Australian output initially and then to a decline in the medium term, while the New Zealand output is negatively affected both in the short and medium term. This result is in line with the recent literature that reports beggar-thy-neighbour effect of positive government spending shocks. © 2012 The Authors. Australian Economic Papers © 2012 Blackwell Publishing Ltd/University of Adelaide and Flinders University.
DOI Link
ISSN
Publisher
Wiley
Volume
51
Issue
4
First Page
167
Last Page
188
Disciplines
Business
Scopus ID
Recommended Citation
Arin, K. Peren; Koyuncu, Murat; and Schumacher, Christoph, "Trans-Tasman Transmission of Government Spending Shocks" (2012). All Works. 3771.
https://zuscholars.zu.ac.ae/works/3771
Indexed in Scopus
yes
Open Access
no