Habit Formation And Government Spending In A Small Open Economy
AbstractThe paper studies the effects of an expansionary fiscal policy in a general equilibrium model of a small open economy. Households are assumed to possess habit-forming, endogenous rates of time preference. In response to fiscal shocks, the model generates cyclical endogenous persistence and procyclical time paths for consumption, employment, and investment, as well as a countercyclical path for the current account. Furthermore, fiscal shocks are shown to have positive long-run effects on output and negative long-run effects on consumption.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 7 (2003)
Issue (Month): 03 (June)
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- Cardi, Olivier & Müller, Gernot J., 2011.
"Habit formation and fiscal transmission in open economies,"
Journal of International Economics,
Elsevier, vol. 85(2), pages 256-267.
- Cardi, Olivier & Müller, Gernot, 2010. "Habit Formation and Fiscal Transmission in Open Economies," CEPR Discussion Papers 8035, C.E.P.R. Discussion Papers.
- Olivier Cardi & Gernot J. Muller, 2010. "Habit Formation and Fiscal Transmission in Open Economies," Working Papers hal-00544484, HAL.
- James M. Nason & Takashi Kano, 2004.
"Business Cycle Implications of Habit Formation,"
Computing in Economics and Finance 2004
175, Society for Computational Economics.
- Schubert, Stefan Franz, 2009. "Dynamic Effects of Oil Price Shocks and their Impact on the Current Account," MPRA Paper 16738, University Library of Munich, Germany.
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