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Policy mix and the U.S. trade balance
Author(s) -
Adler Gustavo,
Osorio Buitron Carolina
Publication year - 2018
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/infi.12334
Subject(s) - economics , policy mix , monetary policy , fiscal policy , monetary economics , stimulus (psychology) , exchange rate , financial crisis , order (exchange) , macroeconomics , balance of trade , international economics , finance , psychology , psychotherapist
The strong policy response of the United States to the 2008–2009 financial crisis raised concerns about its spillovers on other countries. The effects of the monetary stimulus received significant attention, while those of fiscal policy were largely overlooked, despite the combined deployment of these two policy instruments. This paper studies the trade spillovers of the post‐crisis policy mix . We find that overall effects were positive in the immediate aftermath of the crisis, reflecting positive spillovers of fiscal policy that outweighed the negative impact of monetary policy. More generally, our results highlight (i) the importance of studying fiscal and monetary policy spillovers jointly , as models with both instruments produce very different (and arguably more accurate) estimates of the effects of fiscal and monetary policy shocks, and (ii) that exchange rate regimes of trading partners are first‐order determinants of the extent of policy spillovers.