Corsetti and Pesenti (2001) interdependence model showed that a domestic monetary policy can be “Beggar-thy- Self ” in the short run. In other words, the monetary expansion may hurt domestic economy. By depreciating the terms of trade, this policy generates negative externalities that surpass the positive externalities of lowering interest rates. By making the strong hypothesis that fiscal expansions are expended on domestic goods, their model predicts that such policy is “Beggar-thy- Neighbor”. In this chapter, we test this hypothesis by estimating the impact of a fiscal policy in Europe over two Latin American countries: Brazil and Argentina. If the impact is “Prosper-thy- Neighbor”, it means that fiscal expansion in Europe causes an increase in the demand of Latin American goods; otherwise, it means that such expenditure is more on domestic goods and does not reach the demand for goods abroad. We call attention to the relations that enable us to verify the effect of economic policy transmission on long-run consumption and output. The theoretical results imply that domestic consumption is related to the world fiscal position in the long run

Ambrosio Dias, M.H., Dias, J., Punzo, L.F. (2012). International interdependence and macroeconomic transmission.Europe and Latin America. In Beyond the Global Crisis: Structural Adjustments and Regional Integration in Europe and Latin America (pp. 79-90). HOUNDSM ILL, BASINGSTOKE : Routledge.

International interdependence and macroeconomic transmission.Europe and Latin America

PUNZO, LIONELLO FRANCO
2012-01-01

Abstract

Corsetti and Pesenti (2001) interdependence model showed that a domestic monetary policy can be “Beggar-thy- Self ” in the short run. In other words, the monetary expansion may hurt domestic economy. By depreciating the terms of trade, this policy generates negative externalities that surpass the positive externalities of lowering interest rates. By making the strong hypothesis that fiscal expansions are expended on domestic goods, their model predicts that such policy is “Beggar-thy- Neighbor”. In this chapter, we test this hypothesis by estimating the impact of a fiscal policy in Europe over two Latin American countries: Brazil and Argentina. If the impact is “Prosper-thy- Neighbor”, it means that fiscal expansion in Europe causes an increase in the demand of Latin American goods; otherwise, it means that such expenditure is more on domestic goods and does not reach the demand for goods abroad. We call attention to the relations that enable us to verify the effect of economic policy transmission on long-run consumption and output. The theoretical results imply that domestic consumption is related to the world fiscal position in the long run
2012
0415508479
Ambrosio Dias, M.H., Dias, J., Punzo, L.F. (2012). International interdependence and macroeconomic transmission.Europe and Latin America. In Beyond the Global Crisis: Structural Adjustments and Regional Integration in Europe and Latin America (pp. 79-90). HOUNDSM ILL, BASINGSTOKE : Routledge.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11365/36620
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