American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Global Savings and Global Investment: The Transmission of Identified Fiscal Shocks
American Economic Journal: Economic Policy
vol. 4,
no. 2, May 2012
(pp. 95–114)
Abstract
This paper examines the effect of exogenous shocks to savings on world capital markets. Exogenous tax increases in the United States (from Romer and Romer 2010) are only partially offset by changes in domestic private savings, and only a small amount is absorbed by increased domestic investment (contra Feldstein and Horioka 1980). Almost half the change in taxes is transmitted abroad through a change in the US current account. Other countries experience decreases in current accounts and increases in investment in response to exogenous US tax increases. We cannot reject symmetric responses across countries with different currency regimes and levels of development. (JEL E21, E22, E23, E62, F32, F42)Citation
Feyrer, James, and Jay Shambaugh. 2012. "Global Savings and Global Investment: The Transmission of Identified Fiscal Shocks." American Economic Journal: Economic Policy, 4 (2): 95–114. DOI: 10.1257/pol.4.2.95Additional Materials
JEL Classification
- E21 Macroeconomics: Consumption; Saving; Wealth
- E22 Capital; Investment; Capacity
- E23 Macroeconomics: Production
- E62 Fiscal Policy
- F32 Current Account Adjustment; Short-term Capital Movements
- F42 International Policy Coordination and Transmission
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