No. 146. SHOULD FISCAL POLICY BE RELAXED IN THE EUROZONE?

Published in DISCUSSION PAPERS

I. Konstantakopoulou. 2015.

 

DP 146 exof 200x294The purpose of this paper is to study the impact of fiscal policy on the trade account. The empirical analysis is based on quarterly data of the euro area economies for the period 2000-2012. A fully modified OLS estimator is used for the econometric analysis. We provide empirical indications that the composition of total demand affects the result of the external sector. We find that an increase in government expenditures leads to an increase in imports; this implies that, ceteris paribus that it can lead to a deterioration of the trade balance.


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