Analysis of Fiscal Shocks in a Small Open Economy with Home Production
AbstractIn view of the large scale of the nonmarket home sector in both developed and developing economies, in this paper we construct an open economy model with home production. We discuss both long-run and short-run impacts of fiscal policies such as income tax, consumption tax and government spending on factor allocation, capital formation and the current account. The main purpose of the paper is to elucidate the role of home production in an open economy environment. We show that in our framework both fiscal policy and the rate of substitution between market and home goods may affect the dynamic behavior of the economy. As a result, introducing home production may alter the effects of fiscal shocks on key variables in the economy. We confirm this fact by examining various policy experiments both in the short run and long run.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c015_009.
Length: 33 pages
Date of creation: Sep 2010
Date of revision:
Fiscal policy; home production; equilibrium dynamics;
Find related papers by JEL classification:
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Greenwood, Jeremy & Hercowitz, Zvi, 1991.
"The Allocation of Capital and Time over the Business Cycle,"
Journal of Political Economy,
University of Chicago Press, vol. 99(6), pages 1188-214, December.
- Greenwood, J. & Hercowitz, Z., 1991. "The Allocation of Capital and Time Over the Business Cycle," RCER Working Papers 268, University of Rochester - Center for Economic Research (RCER).
- Greenwood, J. & Hercowitz, Z., 1991. "The Allocation of Capital and Time Over the Business Cycles," UWO Department of Economics Working Papers 9104, University of Western Ontario, Department of Economics.
- W. E. G. Salter, 1959. "Internal And External Balance: The Role Op Price And Expenditure Effects," The Economic Record, The Economic Society of Australia, vol. 35(71), pages 226-238, 08.
- Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, June.
- Jeffrey M. Wrase, 2001. "The interplay between home production and business activity," Business Review, Federal Reserve Bank of Philadelphia, issue Q2, pages 23-29.
- Eisner, Robert, 1988. "Extended Accounts for National Income and Product," Journal of Economic Literature, American Economic Association, vol. 26(4), pages 1611-84, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michaela Rank).
If references are entirely missing, you can add them using this form.