Effects of Budgetary Policies in Open Economies: The Role of Intertemporal Consumption Substitution
AbstractAn economy's optimal response to temporary and anticipated future changes in government spending is examined in a two-country model which highlights to role of intertemporal consumption substitution (ICS). The qualitative effects of the two countries coordinating their fiscal policy on each economy's current account, terms of trade, real exchange rate and interest rates depend on the relationship between the domestic and foreign elasticities of ICS.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 675.
Length: 22 pages
Date of creation: 1986
Date of revision:
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