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The New Open Economy Macroeconomics of Government Debt

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Author Info
Ganelli, Giovanni (Trinity College Dublin)

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Abstract

In this paper we introduce an overlapping generations structure of the Blanchard (1985) type in a New Open Economy Macroeconomics model. This allows us to study a wider range of fiscal shocks compared to the traditional Mundell-Fleming and to the baseline Redux (Obstfeld and Rogoff 1995, 1996) models. One important policy implication of our model is that the tax cut implemented in the US in 2001 might have contributed to the appreciation of the Dollar vis-a-vis the Euro. In contrast, the imposition of fiscal constraints such as the ``Golden Rule'' proposed by the UK government can have opposite exchange rate effects.

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Publisher Info
Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 83.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:83

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Web page: http://www.res.org.uk/society/annualconf.asp
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Related research
Keywords: Overlapping generations new open economy macroeconomics debt tax cut

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Find related papers by JEL classification:
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
F31 - International Economics - - International Finance - - - Foreign Exchange
H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management

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  1. Mountford, A. & Uhlig, H., 2002. "What are the effects of fiscal policy shocks?," Discussion Paper 31, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. Fatás, Antonio & Mihov, Ilian, 2001. "The Effects of Fiscal Policy on Consumption and Employment: Theory and Evidence," CEPR Discussion Papers 2760, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Olivier J. Blanchard, 1984. "Debt, Deficits and Finite Horizons," NBER Working Papers 1389, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Roberto Perotti, . "Estimating the effects of fiscal policy in OECD countries," Working Papers 276, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
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  5. Ganelli, Giovanni, 2003. "Useful government spending, direct crowding-out and fiscal policy interdependence," Journal of International Money and Finance, Elsevier, vol. 22(1), pages 87-103, February. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, 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.)

  1. Dennis P. J. Botman & Manmohan S. Kumar, 2007. "Global Aging Pressures: Impact of Fiscal Adjustment, Policy Cooperation, and Structural Reforms," IMF Working Papers 07/196, International Monetary Fund. [Downloadable!]
  2. Babacar XSENE, 2005. "Impact du fardeau virtuel de la dette sur le taux de change réel d'équilibre des pays en développement," Macroeconomics 0501014, EconWPA. [Downloadable!]
  3. Leonor Coutinho, 2003. "Fiscal Policy in the New Open Economy. Macroeconomics and Prospects for Fiscal Policy Coordination," Economics Working Papers 021, European Network of Economic Policy Research Institutes. [Downloadable!]
  4. Meixing Dai, 2007. "Endogenous Wealth-Depending Time Preference and Fiscal Policy in Open Economy," Economics Bulletin, Economics Bulletin, vol. 8(7), pages 1-7. [Downloadable!]
  5. Ben J. Heijdra & Jenny Ligthart, 2006. "The Transitional Dynamics of Fiscal Policy in Small Open Economies," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  6. Silvia Sgherri & Tamim Bayoumi, 2006. "Mr. Ricardo's Great Adventure: Estimating Fiscal Multipliers in a Truly Intertemporal Model," IMF Working Papers 06/168, International Monetary Fund. [Downloadable!]
    Other versions:
  7. Tatiana Kirsanova & Simon Wren-Lewis, 2007. "Optimal fiscal feedback on debt in an economy with nominal rigidities," Working Paper 2007-26, Federal Reserve Bank of Atlanta. [Downloadable!]
    Other versions:
  8. Philip R. Lane & Giovanni Ganelli, 2002. "Dynamic General Equilibrium Analysis: The Open Economy Dimension," Trinity Economics Papers 200212, Trinity College Dublin, Department of Economics. [Downloadable!]
    Other versions:
  9. Dennis P. J. Botman & Manmohan S. Kumar, 2006. "Fundamental Determinants of the Effects of Fiscal Policy," IMF Working Papers 06/72, International Monetary Fund. [Downloadable!]
  10. Giovanni Ganelli & Juha Tervala, 2007. "Public Infrastructures, Public Consumption, and Welfare in a New-Open-Economy-Macro Model," IMF Working Papers 07/67, International Monetary Fund. [Downloadable!]
  11. Kirsanova, Tatiana & Satchi, Mathan & Vines, David & Wren-Lewis, Simon, 2006. "Optimal Fiscal Policy Rules in a Monetary Union," CEPR Discussion Papers 5533, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Tamim Bayoumi & Silvia Sgherri, 2007. "On the Impact of Income and Policy Shocks on Consumption," DNB Working Papers 152, Netherlands Central Bank, Research Department. [Downloadable!]
  13. Giancarlo Corsetti, 2007. "New Open Economy Macroeconomics," RSCAS Working Papers 2007/27, European University Institute. [Downloadable!]
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