Public Spending Management and Macroeconomic Interdependence
AbstractThis paper studies, in the context of a New Open Economy Macroeconomics (NOEM) model, the effects of "public competition policies" aimed at improving the efficiency of public spending. Such measures are modeled as an increase in the price elasticity of public consumption. The paper finds that public competition policies significantly affect macroeconomic interdependence across countries. Following a domestic fiscal expansion, an higher public price elasticity increases the substitutability between goods purchased by the domestic and the foreign governments. The same exchange rate variation can therefore sustain larger shifts in relative demand for goods. The expenditure-switching effect is magnified, implying a larger change in relative output. In welfare terms, countries with a larger government sector have an incentive to promote public competition policies.
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Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 19 (2008)
Issue (Month): 2 (April)
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Web page: http://www.springerlink.com/link.asp?id=100323
Public competition policies; Macroeconomic interdependence; Government spending; E62; F41; H11;
Other versions of this item:
- Giovanni Ganelli, 2004. "Public Spending Management and Macroeconomic Interdependence," IMF Working Papers 04/102, International Monetary Fund.
- Giovanni Ganelli, 2004. "Public Spending Management And Macroeconomic Interdependence," Royal Economic Society Annual Conference 2004 31, Royal Economic Society.
- Giovanni Ganelli, 2003. "Public Spending Management and Macroeconomic Interdependence," Trinity Economics Papers 20039, Trinity College Dublin, Department of Economics.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
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