... constant,an increase in Home government expenditures decreases dividends net of taxes at Home and raises Home non-financial incomes by raising the relative demand for Home goods (see (38 ) and (40) for δG= ... perfect and many papers found it pretty low (see Fama and Schwert (1977) for earlier work and Bottazzi, Pesenti and van Wincoop (1996), Julliard(20 03, 2004), Lustig and Nieuwerburgh (2005)).10 3 ... is fully biased towards local stocks and S = 1.20The reason is simple, from (37 ), a 1% increase in Home government expenditures raises Home dividends and Home non-financial income before taxes...