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Wealth Effects and Fiscal Policy in the National Institute Global Econometric Model∗

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  • Barrell, Ray
  • in't Veld, Jan Willem

Abstract

This paper analyses the role of wealth in the National Institute model of the World Economy (NIGEM). It also addresses the issues of fiscal solvency and the rote of the government budget constraint. We start with a brief theoretical and empirical overview of wealth and consumption functions. We then describe the introduction of public sector blocks into the model and summarise our approach to the determination of wealth. The paper then reports on a set of diagnostic simulations using NIGEM. We analyse the effects of a permanent fiscal expansion and its implications. We also discuss the importance of solvency constraints on the government in the solution of a forward looking model without Ricardian equivalence. We then analyse the effects of a change in equity prices in one country relative to those in the rest of the world.

Suggested Citation

  • Barrell, Ray & in't Veld, Jan Willem, 1992. "Wealth Effects and Fiscal Policy in the National Institute Global Econometric Model∗," National Institute Economic Review, National Institute of Economic and Social Research, vol. 140, pages 78-85, May.
    • Handle: RePEc:cup:nierev:v:140:y:1992:i::p:78-85_7
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    Cited by:

    1. Ricardo M. Sousa, 2009. "Wealth Effetcs on Consumption: Evidence from the euro area," NIPE Working Papers 12/2009, NIPE - Universidade do Minho.
    2. Ricardo M. Sousa, 2003. "Property of stocks and wealth effects on consumption," NIPE Working Papers 2/2003, NIPE - Universidade do Minho.

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