This paper contrasts the effects of a permanent and temporary investment tax credit in an open economy. In both cases an ITC will initially stimulate investment, while reducing employment and output, and generating a current account deficit. If the ITC is permanent, the accumulation of capital leads to a higher equilibrium capital stock, higher employment and output, and a reduction in the economy's stock of net credit. If the ITC is temporary, after its removal, the economy eventually moves to a new steady-state equilibrium having a lower permanent capital stock and employment, together with a higher stock of net credit.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
3298.
Length: Date of creation: Feb 1991 Date of revision: Publication status: published as Journal of Public Economics, Vol. 42, No. 3, pp. 277-299, (August 1990). Handle: RePEc:nbr:nberwo:3298
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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.:
Maurice Obstfeld & Alan C. Stockman, 1985.
"Exchange-Rate Dynamics,"
NBER Working Papers
1230, National Bureau of Economic Research, Inc.
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Other versions:
Obstfeld, Maurice & Stockman, Alan C., 1985.
"Exchange-rate dynamics,"
Handbook of International Economics,
in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 18, pages 917-977
Elsevier.
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