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Government Spending and the International Business Cycle

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  • Maurice J. Roche

Abstract

In this paper, the author develops a stochastic general equilibrium model of the world economy. It differs from previous multicountry models in the introduction of the government sector. The author assumes that countries produce a nonspecialized traded good and that households derive utility from the consumption of private and public goods and services. This simple modification has a potential explanation for the low cross-country correlations in private consumption and output and the countercyclical trade balances that are observed empirically.

Suggested Citation

  • Maurice J. Roche, 1996. "Government Spending and the International Business Cycle," Canadian Journal of Economics, Canadian Economics Association, vol. 29(4), pages 865-884, November.
  • Handle: RePEc:cje:issued:v:29:y:1996:i:4:p:865-84
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    Cited by:

    1. Michael Gail, 1998. "Stylized Facts and International Business Cycles - The German Case," Volkswirtschaftliche Diskussionsbeiträge 69-98, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, revised 2000.
    2. Ghate, Chetan & Gopalakrishnan, Pawan & Tarafdar, Suchismita, 2016. "Fiscal policy in an emerging market business cycle model," The Journal of Economic Asymmetries, Elsevier, vol. 14(PA), pages 52-77.
    3. Faik Koray & K. Peren Arin, 2006. "International Transmission of Fiscal Shocks: An Empirical Investigation," Departmental Working Papers 2006-03, Department of Economics, Louisiana State University.
    4. Ganelli, Giovanni, 2003. "Useful government spending, direct crowding-out and fiscal policy interdependence," Journal of International Money and Finance, Elsevier, vol. 22(1), pages 87-103, February.
    5. Jiang, Mingming, 2016. "By force of demand: Explaining cyclical fluctuations of international trade and government spending," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 249-267.
    6. Ganelli, Giovanni & Tervala, Juha, 2010. "Public infrastructures, public consumption, and welfare in a new-open-economy-macro model," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 827-837, September.
    7. Juha Tervala, 2008. "Fiscal policy and direct crowding-out in a small open economy," International Economics and Economic Policy, Springer, vol. 5(3), pages 255-268, November.

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