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Non-traded Goods and the International Transmission of Fiscal Policy

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  • Michael Devereux

Abstract

This paper looks at the effect of nontraded goods on the international transmission of fiscal policy. Interte mporal movements in the price of nontraded goods affect real interest rates differentially between countries. The real interest-rate effec ts of a fiscal expansion depend crucially upon both the composition o f fiscal spending and the intertemporal elasticity of substitution. W ith a high intertemporal elasticity of substitution in consumption, a temporary fiscal expansion on nontraded goods will lead real consume r interest rates to move in opposite directions between countries.

Suggested Citation

  • Michael Devereux, 1988. "Non-traded Goods and the International Transmission of Fiscal Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 21(2), pages 265-278, May.
    • Handle: RePEc:cje:issued:v:21:y:1988:i:2:p:265-78
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    Cited by:

    1. Sajid Anwar, 1997. "International Transmission of Government Spending, Monopolistic Competition and North-South Trade," International Economic Journal, Taylor & Francis Journals, vol. 11(4), pages 113-126.
    2. Bernard Dumas, 1993. "Partial- vs general-equilibrium models of the international capital market," Working Papers hal-00610766, HAL.
    3. Sajid Anwar, 1993. "International transmission of government spending on industries," Open Economies Review, Springer, vol. 4(3), pages 287-301, September.
    4. Fung, Michael Ka-Yiu, 1996. "Who pays for fiscal expansion? Distributional effects of fiscal spending in a small open economy with foreign capital," Journal of Macroeconomics, Elsevier, vol. 18(4), pages 715-726.
    5. Anwar, Sajid, 1998. "Government Size, Product Diversity and International Trade," Journal of Policy Modeling, Elsevier, vol. 20(1), pages 1-9, February.

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