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The Role of Fiscal Policy in an Incomplete Markets Framework

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  • Thomas, Charles P
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    Abstract

    A general-equilibrium model is developed to highlight the link between neo-Keynesian models of unemployment and recent results on the constrained suboptimality of competitive economies with incomplete asset markets. Although the model deviates from the Arrow-Debreu paradigm only by the absence of some contingent claims, the competitive equilibrium exhibits underemployment and balanced-budget fiscal policies have Keynesian effects that are Pareto improving. Copyright 1995 by The Review of Economic Studies Limited.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Review of Economic Studies.

    Volume (Year): 62 (1995)
    Issue (Month): 3 (July)
    Pages: 449-68

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    Handle: RePEc:bla:restud:v:62:y:1995:i:3:p:449-68

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    Cited by:
    1. Andersen, Torben M. & Spange, Morten, 2006. "International interdependencies in fiscal stabilization policies," European Economic Review, Elsevier, vol. 50(5), pages 1169-1195, July.
    2. Andersen, Torben M., 2001. "Active stabilization policy and uninsurable risks," Economics Letters, Elsevier, vol. 72(3), pages 347-354, September.
    3. Partha Sen, 2008. "Fixed Costs, The Balanced-Budget Multiplier And Welfare," Working papers 171, Centre for Development Economics, Delhi School of Economics.
    4. Andersen, Torben M. & Holden, Steinar, 2002. "Stabilization policy in an open economy," Journal of Macroeconomics, Elsevier, vol. 24(3), pages 293-312, September.
    5. Andersen, T.M. & Holden, S., 1998. "Business Cycles and Fiscal Policy in an Open Economy," Memorandum 12/1998, Oslo University, Department of Economics.
    6. Summer, Martin, 2002. "Financial markets, the structure of long-term investments and labour income risks," Research in Economics, Elsevier, vol. 56(3), pages 265-298, September.
    7. Gaël Giraud & Cécile Renouard, 2011. "In search of an alternative to shareholder value maximization," Post-Print hal-00609153, HAL.

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