The Korean Economic Review
International Fiscal Spillovers: A Review Essay
Michael B. Devereux (University of British Columbia)Year 2018Vol. 34No. 1
This paper provides a review of the empirical literature on fiscal multipliers and international fiscal spillovers. We discuss the various empirical methodologies employed in measuring spillovers, and the degree to which estimated spillovers depend on the state of the business cycle, the stance of monetary policy, the exchange rate regime, and other factors. In an environment where monetary policy is constrained by the zero bound, both fiscal multipliers and international fiscal spillovers are likely to be much larger than in normal times. In general, this prediction is supported in the empirical literature.