The impact of structural policies on external accounts in infinite-horizon and finite-horizon models
AbstractThe paper uses the European Commission's QUEST III model to compare the impact of product market reform, labour market re-form and fiscal devaluation on economic activity and external accounts in infinite-horizon and finite-horizon versions of the model for a small open economy in monetary union with tradable and non-tradable sectors. The impact of structural policies on external positions tends to be stronger and more persistent, but also more diverse in the finite-horizon specification because of the impact of structural reforms on financial wealth and its transmission to consumption demand in the finite-horizon setting. The improvement in the net foreign asset position tends to be stronger if structural reforms are accompanied by fiscal consolidation and if countries start with high pre-reform levels of net foreign debt.
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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 474.
Length: 41 pages
Date of creation: Dec 2012
Date of revision:
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Other versions of this item:
- Lukas Vogel, 2013. "The Impact of Structural Policies on External Accounts in Infinite-horizon and Finite-horizon Models," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 103-117, 02.
- F30 - International Economics - - International Finance - - - General
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
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- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2009.
"New Keynesian Models: Not Yet Useful for Policy Analysis,"
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American Economic Association, vol. 1(1), pages 242-66, January.
- Ellen R. McGrattan & Patrick J. Kehoe & V. V. Chari, 2008. "New Keynesian models: not yet useful for policy analysis," Working Papers 664, Federal Reserve Bank of Minneapolis.
- V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2008. "New Keynesian models: not yet useful for policy analysis," Staff Report 409, Federal Reserve Bank of Minneapolis.
- V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2008. "New Keynesian Models: Not Yet Useful for Policy Analysis," NBER Working Papers 14313, National Bureau of Economic Research, Inc.
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