This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Habit persistence and effectiveness of fiscal policy in an open economy

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Olivier Cardi () (ERMES - Equipe de recherche sur les marches, l'emploi et la simulation - CNRS : UMR7017 - Université Panthéon-Assas - Paris II, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)

Additional information is available for the following registered author(s):

Abstract

An open economy version of the Baxter and King's [1993] model is constructed with habit formation to investigate the dynamic and steady-state effects of an expansionary budget policy. In line with empirical evidence, consumption is weakly responsive, investment is crowded out, the drop in savings drives the current account into deficit and government spending multipliers display small values. The sensitivity analysis shows that the effectiveness of the fiscal policy (1) decreases as habit persistence gets stronger, (2) increases with labor supply responsiveness, (3) falls with trade integration. Finally, we find that habit persistence weakens the connection between government spending multipliers and both the elasticity of labor supply and exports-to-GDP ratio.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.

File URL: http://hal.archives-ouvertes.fr/docs/00/42/01/38/PDF/2009-39.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by HAL in its series Working Papers with number hal-00420138_v1.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 28 Sep 2009
Date of revision:
Handle: RePEc:hal:wpaper:hal-00420138_v1

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00420138/en/
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/

For technical questions regarding this item, or to correct its listing, contact: (CCSD).

Related research
Keywords: Investment; Current Account; Habit Formation; Expenditure Multiplier.;

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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. Shi, Shouyong & Epstein, Larry G, 1993. "Habits and Time Preference," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 61-84, February. [Downloadable!] (restricted)
  2. Epstein, Larry G., 1987. "A simple dynamic general equilibrium model," Journal of Economic Theory, Elsevier, vol. 41(1), pages 68-95, February. [Downloadable!] (restricted)
  3. Engelbert Dockner & Gustav Feichtinger, 1991. "On the optimality of limit cycles in dynamic economic systems," Journal of Economics, Springer, vol. 53(1), pages 31-50, February. [Downloadable!] (restricted)
  4. Kollmann, Robert, 2001. "The exchange rate in a dynamic-optimizing business cycle model with nominal rigidities: a quantitative investigation," Journal of International Economics, Elsevier, vol. 55(2), pages 243-262, December. [Downloadable!] (restricted)
  5. Becker, Gary S & Murphy, Kevin M, 1988. "A Theory of Rational Addiction," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 675-700, August. [Downloadable!] (restricted)
    Other versions:
Full references

Statistics
Access and download statistics

Did you know? All bibliographic data on IDEAS has been put in the public domain by the publishers.

This page was last updated on 2009-12-17.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.