2011/02/01 by Roel Beetsma, Massimo Giuliodori · 220 citations
Economics, Econometrics and Finance · #Balance (ability) #Balance of trade #Consumption (sociology) #Economics #Fiscal Policy and Economic Growth #Global Financial Crisis and Policies #Government (linguistics) #International economics #Investment (military) #Monetary Policy and Economic Impact #Monetary economics
paper · doi:10.1111/j.1468-0297.2010.02413.x
published in The Economic Journal 121(550), F4-F32 (Oxford University Press)
openalex publication_date 2011/02/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/26
In this article, we review the theoretical consequences of government purchases shocks for both closed and open economies, followed by a discussion of the empirical literature. Next, we provide our own estimates for the EU countries. We find that an increase in government purchases raises output, consumption and investment and reduces the trade balance. However, the stimulating effect is weaker and the trade balance reduction is larger for the more open EU economies, consistent with larger leakage effects. Further, we show that government purchases shocks in large EU economies have non‐negligible consequences for economic activity in the main trading partners.