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The new open economy macroeconomics of government debt

  • Ganelli, Giovanni

In this paper we introduce an overlapping generations structure of the Blanchard type in a New Open Economy macroeconomics model. This allows us to study a wider range of fiscal shocks compared to the traditional Mundell-Fleming and to the baseline Redux models. One important policy implication of our model is that the tax cut implemented in the US in 2001 might have contributed to the appreciation of hte Dollar vis-a-vis the Euro. In contrast, the imposition of fiscal constraint such as the "Golden Rule" proposed by the UK government can have opposite exchange rate effects.

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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 65 (2005)
Issue (Month): 1 (January)
Pages: 167-184

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Handle: RePEc:eee:inecon:v:65:y:2005:i:1:p:167-184
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  7. Calvo, Guillermo A & Obstfeld, Maurice, 1988. "Optimal Time-Consistent Fiscal Policy with Finite Lifetimes," Econometrica, Econometric Society, vol. 56(2), pages 411-32, March.
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  18. Tille, Cedric, 2001. "The role of consumption substitutability in the international transmission of monetary shocks," Journal of International Economics, Elsevier, vol. 53(2), pages 421-444, April.
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