Fiscal Policy in a Small Open Economy with Oil Sector and non-Ricardian Agents
AbstractIn this paper we develop a dynamic stochastic general equilibrium fiscal model for the Colombian economy. The model has three main components: the existence of non-Ricardian households, price and wage rigidities, and a fiscal authority that finances government spending partly with public debt. The model is calibrated to capture the empirical evidence on the macroeconomic effects of government spending and it is used to study the effect of an oil price shock under different fiscal policy rules. Our results show that fiscal multipliers in Colombia are positive in a way consistent with the evidence. Our analysis also shows that a structural fiscal rule delivers a better outcome in terms of macroeconomic volatility relative to a balanced budget rule or a countercyclical fiscal rule.
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Bibliographic InfoPaper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 010483.
Date of creation: 17 Feb 2013
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Fiscal multipliers; fiscal policy rules; non-Ricardian households; DSGE model.;
Other versions of this item:
- Andrés González & Martha Rosalba López Piñeros & Norberto Rodríguez Niño & Santiago Téllez, 2013. "Fiscal Policy in a Small Open Economy with Oil Sector and non-Ricardian Agents," Borradores de Economia 759, Banco de la Republica de Colombia.
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-02 (All new papers)
- NEP-DGE-2013-03-02 (Dynamic General Equilibrium)
- NEP-MAC-2013-03-02 (Macroeconomics)
- NEP-PUB-2013-03-02 (Public Finance)
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