The Global Effects of U.S. Fiscal Policy
AbstractThe author examines the global impact of U.S. fiscal policy using the Bank of Canada's Global Economy Model (Lalonde and Muir 2007). In particular, she examines the global macroeconomic implications of the expiration of major tax cuts in the United States and of expected increases in U.S. entitlement program expenditures. The results of her analysis suggest that the expiration of previously enacted tax cuts in the United States will impose short-run costs on the U.S. economy. However, the rest of the world will benefit from an associated decline in the world real interest rate and from a redistribution of wealth linked to a partial reversal of global current account imbalances as U.S. government debt declines. The author's analysis of the expected increase in U.S. entitlement program expenditures, financed through debt, suggests that entitlement program expenditures will crowd out economic growth in the United States and the rest of the world.
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Bibliographic InfoPaper provided by Bank of Canada in its series Discussion Papers with number 08-8.
Length: 42 pages
Date of creation: 2008
Date of revision:
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Fiscal policy; International topics; Regional economic developments;
Find related papers by JEL classification:
- H0 - Public Economics - - General
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-07 (All new papers)
- NEP-CBA-2008-06-07 (Central Banking)
- NEP-PBE-2008-06-07 (Public Economics)
- NEP-PUB-2008-06-07 (Public Finance)
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