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| Author: | Canova, F. Pappa, E. |
| Title: | Price differentials in monetary unions: the role of fiscal shocks |
| Journal: | Economic Journal
2007 : APR, VOL. 117:520, p. 713-737 |
| Index terms: | economic shocks fiscal policy monetary integration prices European Union USA |
| Language: | eng |
| Abstract: | This article studies the effect of regional expenditure and revenue shocks on price differentials for 47 US states and 9 EU countries. Shocks are identified by using sign restrictions on the dynamics of expenditures, revenues, deficits and output and two estimates are constructed for structural price differentials dynamics, one for the average and one for each unit, which optimally weight information contained in the data for all units. On average, expansionary fiscal disturbances produce positive, while distortionary balance budget shocks produce negative price differential responses. |
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