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Intertemporal Budget Policies and Macroeconomic Adjustment in a Small Open Economy

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  • Fisher, Walter H.

    (Department of Economics and Finance, Institute for Advanced Studies)

  • Bianconi, Marcelo

    (Department of Economics, Tufts University)

Abstract

This paper analyzes the role of nominal assets in ranking intertemporal budget policies in a growing open economy. The budget policies are ranked in terms of the public's intertemporal stock of tax liabilities. Our main result is that, in a small open economy, the valuation of private and public assets is in terms of the exogenous foreign price level under purchasing power parity. This constraint limits the scope of government to influence the real value of assets using fiscal and monetary policy shocks.

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File URL: http://www.ihs.ac.at/publications/eco/es-96.pdf
File Function: First version, 2001
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Bibliographic Info

Paper provided by Institute for Advanced Studies in its series Economics Series with number 96.

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Length: 31 pages
Date of creation: Feb 2001
Date of revision:
Handle: RePEc:ihs:ihsesp:96

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Keywords: Government budget; Taxation; Nominal asstes; Current account;

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  1. Agell, Jonas & Persson, Mats, 2000. "On the Analytics of the Dynamic Laffer Curve," Working Paper Series, Uppsala University, Department of Economics 2000:5, Uppsala University, Department of Economics.
  2. Fumio Hayashi, 1981. "Tobin's Marginal q and Average a : A Neoclassical Interpretation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 457, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  4. Slemrod,Joel, 1994. "Tax Progressivity and Income Inequality," Cambridge Books, Cambridge University Press, number 9780521465434, 9.
  5. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 500-521, June.
  6. Guillermo A. Calvo, 2001. "Capital markets and the exchange rate with special reference to the dollarization debate in Latin America," Proceedings, Federal Reserve Bank of Cleveland, pages 312-338.
  7. Turnovsky, Stephen J., 1996. "Fiscal policy, growth, and macroeconomic performance in a small open economy," Journal of International Economics, Elsevier, vol. 40(1-2), pages 41-66, February.
  8. Bianconi, Marcelo, 1999. "Intertemporal budget policies in an endogenous growth model with nominal assets," International Review of Economics & Finance, Elsevier, Elsevier, vol. 8(1), pages 25-43, January.
  9. Marcelo Bianconi & Walter H. Fisher, 2003. "Intertemporal Budget Policies and Macroeconomic Adjustment in a Small Open Economy," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 0312, Department of Economics, Tufts University.
  10. Bruce, Neil & Turnovsky, Stephen J, 1999. "Budget Balance, Welfare, and the Growth Rate: "Dynamic Scoring" of the Long-Run Government Budget," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 31(2), pages 162-86, May.
  11. Ireland, Peter N., 1994. "Supply-side economics and endogenous growth," Journal of Monetary Economics, Elsevier, Elsevier, vol. 33(3), pages 559-571, June.
  12. Stephen J. Turnovsky, 1997. "International Macroeconomic Dynamics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262201119, December.
  13. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(3), pages 485-517, June.
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Cited by:
  1. Fisher, Walter H. & Bianconi, Marcelo, 2001. "Intertemporal Budget Policies and Macroeconomic Adjustment in a Small Open Economy," Economics Series 96, Institute for Advanced Studies.
  2. Bianconi, Marcelo & Fisher, Walter H., 2011. "Intertemporal Budget Policies and Macroeconomic Adjustment in Indebted Open Economies," Economics Series 271, Institute for Advanced Studies.

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