The global implications of more US fiscal stimulus

If passed in full, President Biden’s $1.9tn American Rescue Plan would constitute a fiscal stimulus worth 1.4% of global GDP, coming hot off the heels of the $900bn deal struck in December. While a boon for the US economy, we think that the economic ramifications for the rest of the world via the traditional trade, monetary, and exchange rate channels will be small. Rather, the main global effects could come through an even stronger performance of risky assets, and a shift in the fiscal policy debate elsewhere.