Fiscal shocks in a two sector open economy with endogenous markups
AbstractWe use a two-sector neoclassical open economy model with traded and non-traded goods and endogenous markups to investigate both the aggregate and the sectoral ef- fects of temporary fiscal shocks. One central finding is that both the sectoral capital intensities and endogenous markups matter in determining the response of key eco- nomic variables. In particular, the model can produce a drop in investment and in the current account, in line with empirical evidence, only if the traded sector is more capital intensive than the non-traded sector. Irrespective of sectoral capital intensities, a fiscal shock raises the relative size of the non-traded sector substantially in the short-run. Additionally, allowing for the markup to depend on the number of competitors, the two-sector model can account for the real exchange rate depreciation found in the data. Finally, markup variations triggered by firm entry can raise the real wage, albeit under certain circumstances, and modify substantially the sectoral composition of GDP in the short-run.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2012-17.
Date of creation: 2012
Date of revision:
Contact details of provider:
Postal: PEGE. 61, Aven. de la Forêt-Noire 67000 Strasbourg
Phone: +33 3 68 85 20 69
Fax: +33 3 68 85 20 70
Web page: http://www.beta-umr7522.fr/
More information through EDIRC
Non-traded Goods; Fiscal Shocks; Investment; Current Account.;
Find related papers by JEL classification:
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-03 (All new papers)
- NEP-DGE-2012-11-03 (Dynamic General Equilibrium)
- NEP-OPM-2012-11-03 (Open Economy Macroeconomic)
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.:
- Claudia Curi & Cinzia Daraio & Patrick Llerena, 2012.
"University Technology Transfer: How (in-)efficient are French universities?,"
Working Papers of BETA
2012-02, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- Claudia Curi & Cinzia Daraio & Patrick Llerena, 2012. "University technology transfer: how (in)efficient are French universities?," Cambridge Journal of Economics, Oxford University Press, vol. 36(3), pages 629-654.
- Claudia Curi & Cinzia Daraio & Maria Patrick Llerena, 2012. "University Technology Transfer: How (in-)efficient are French universities?," DIS Technical Reports 2012-02, Department of Computer, Control and Management Engineering, Università degli Studi di Roma "La Sapienza".
- Julien Pénin, 2012. "Motivation crowding-out: Is there a risk for science?," Working Papers of BETA 2012-13, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- Olivier Cardi & Romain Restout, 2012. "Unanticipated vs. Anticipated Tax Reforms in a Two-Sector Open Economy," Working Papers of BETA 2012-01, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- Nir Jaimovich, 2004.
"Firm Dynamics, Markup Variations, and the Business Cycle,"
07-013, Stanford Institute for Economic Policy Research, revised Mar 2007.
- Jaimovich, Nir & Floetotto, Max, 2008. "Firm dynamics, markup variations, and the business cycle," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1238-1252, October.
- Schubert, Stefan F & Turnovsky, Stephen J, 2002. "The Dynamics of Temporary Policies in a Small Open Economy," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 604-22, November.
- Meixing Dai, 2012. "Static and Dynamic Effects of Central Bank Transparency," Working Papers of BETA 2012-08, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.