Capital Mobility and the Effectiveness of Fiscal Policy in Open Economies
AbstractThis paper uses a dynamic general equilibrium two-country optimizing Â‘new-open economy macroeconomicsÂ’ model to analyze the consequences of international capital mobility for the effectiveness of fiscal policy. Conventional wisdom suggests that higher capital mobility diminishes the effectiveness of fiscal policy. The model laid out in this paper provides an example that a higher degree of capital mobility can also increase the effectiveness of fiscal policy. This tends to be the case if the stance of monetary policy can be described by means of a simple monetary policy rule.
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1164.
Length: 25 pages
Date of creation: May 2003
Date of revision:
Fiscal policy; Capital mobility; Financial market integration; Monetary Policy;
Other versions of this item:
- Pierdzioch, Christian, 2004. "Capital mobility and the effectiveness of fiscal policy in open economies," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 465-479, September.
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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