Bilateral trade effects of fiscal devaluation: Evidence from OECD countries


KIRAL H., ERDEN L.

JOURNAL OF INTERNATIONAL TRADE & ECONOMIC DEVELOPMENT, cilt.27, sa.6, ss.585-606, 2018 (SSCI İndekslerine Giren Dergi) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 27 Konu: 6
  • Basım Tarihi: 2018
  • Doi Numarası: 10.1080/09638199.2017.1402945
  • Dergi Adı: JOURNAL OF INTERNATIONAL TRADE & ECONOMIC DEVELOPMENT
  • Sayfa Sayıları: ss.585-606

Özet

This paper empirically examines the effects of a fiscal devaluation on bilateral trade. To this end, employers' social contribution (ESC) and value-added tax (VAT), which stand as the factors that represent typical fiscal devaluation, are embodied within the framework of a gravity model. Fixed effects vector decomposition (FEVD) technique is applied to the empirical models specified within this framework, employing panel data from 22 OECD countries over the 1980-2014 periods. The findings show that the effectiveness of the fiscal devaluation policy seems to alter with respect to how ESC and VAT are measured. Considering the fiscal devaluation policy implemented unilaterally, the policy turns out to be effective in nine countries in the sample.