IDEAS home Printed from https://ideas.repec.org/a/oup/oxecpp/v60y2008i1p88-121.html
   My bibliography  Save this article

A life-cycle overlapping-generations model of the small open economy

Author

Listed:
  • Ben J. Heijdra
  • Ward E. Romp

Abstract

We construct an overlapping generations model for the small open economy incorporating a realistic description of the mortality process. With age-dependent mortality, the typical life-cycle pattern of consumption and saving results from the maximizing behaviour of individual households. Our 'Blanchard-Yaari-Modigliani' model is used to analytically study a number of typical shocks affecting the small open economy, namely a balanced-budget public spending shock, a temporary Ricardian tax cut, and an interest rate shock. The demographic details matter a lot—both the impulse-response functions and the welfare profiles (associated with the different shocks) are critically affected by them. These demographic details furthermore do not wash out in the aggregate. The model is flexible and can be applied to a wide variety of theoretical and policy issues. Copyright 2008 , Oxford University Press.

Suggested Citation

  • Ben J. Heijdra & Ward E. Romp, 2008. "A life-cycle overlapping-generations model of the small open economy," Oxford Economic Papers, Oxford University Press, vol. 60(1), pages 88-121, January.
    • Handle: RePEc:oup:oxecpp:v:60:y:2008:i:1:p:88-121
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/oep/gpm009
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Leon Bettendorf & Ben Heijdra, 2001. "Intergenerational and International Welfare Leakages of a Product Subsidy in a Small Open Economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(5), pages 705-729, November.
    2. Heijdra, Ben J. & Horst, Albert van der & Meijdam, Lex, 2002. "Public investment and intergenerational distribution under alternative modes of financing," Research Report 02C51, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    3. Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(2), pages 137-150.
    4. Calvo, Guillermo A & Obstfeld, Maurice, 1988. "Optimal Time-Consistent Fiscal Policy with Finite Lifetimes," Econometrica, Econometric Society, vol. 56(2), pages 411-432, March.
    5. Leon Bettendorf & Ben Heijdra, 2001. "Intergenerational welfare effects of a tariff under monopolistic competition," Journal of Economics, Springer, vol. 73(3), pages 313-346, October.
    6. repec:dgr:rugsom:02c51 is not listed on IDEAS
    7. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
    8. Lans Bovenberg, A., 1993. "Investment-promoting policies in open economies : The importance of intergenerational and international distributional effects," Journal of Public Economics, Elsevier, vol. 51(1), pages 3-54, May.
    9. Hamid Faruqee, 2003. "Debt, Deficits, and Age-specific Mortality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(2), pages 300-312, April.
    10. Weil, Philippe, 1989. "Overlapping families of infinitely-lived agents," Journal of Public Economics, Elsevier, vol. 38(2), pages 183-198, March.
    11. Bovenberg, A.L., 1993. "Investment-promoting policies in open economies : The importance of intergenerational and international distributional effects," Other publications TiSEM 2a11d648-7fac-4a3f-b6bf-c, Tilburg University, School of Economics and Management.
    12. Heijdra, Ben J. & Meijdam, Lex, 2002. "Public investment and intergenerational distribution," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 707-735, May.
    13. Lembke B., 1918. "√ a. p," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 111(1), pages 709-712, February.
    14. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, April.
    15. Buiter, Willem H, 1988. "Death, Birth, Productivity Growth and Debt Neutrality," Economic Journal, Royal Economic Society, vol. 98(391), pages 279-293, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:dgr:rugsom:05c04 is not listed on IDEAS
    2. Heijdra, Ben J. & Ligthart, Jenny E., 2006. "The Macroeconomic Dynamics Of Demographic Shocks," Macroeconomic Dynamics, Cambridge University Press, vol. 10(3), pages 349-370, June.
    3. Christian Keuschnigg, 1996. "Overshooting adjustment to tariff liberalization," Open Economies Review, Springer, vol. 7(3), pages 237-255, July.
    4. Mathieu-Bolh, Nathalie, 2017. "Can tax reforms help achieve sustainable development?," Resource and Energy Economics, Elsevier, vol. 50(C), pages 135-163.
    5. Bettendorf, Leon J.H. & Heijdra, Ben J., 2006. "Population ageing and pension reform in a small open economy with non-traded goods," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2389-2424, December.
    6. Pasquale Scaramozzino & Giancarlo Marini, 2000. "Social time preference," Journal of Population Economics, Springer;European Society for Population Economics, vol. 13(4), pages 639-645.
    7. Warwick J. McKibbin, 2006. "The Global Macroeconomic Consequences of a Demographic Transition," Asian Economic Papers, MIT Press, vol. 5(1), pages 92-134, Winter.
    8. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May.
    9. Keuschnigg, Christian & Kohler, Wilhelm, 1996. "Commercial policy and dynamic adjustment under monopolistic competition," Journal of International Economics, Elsevier, vol. 40(3-4), pages 373-409, May.
    10. Christian Keuschnigg, 1994. "The vanishing savings motive," Journal of Economics, Springer, vol. 60(2), pages 189-197, June.
    11. Lee H. Endress & Sittidaj Pongkijvorasin & James Roumasset & Christopher Wada, 2013. "Intergenerational Equity with Individual Impatience in an OLG Model of Optimal and Sustainable Growth," Working Papers 2013-9, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    12. Jochen Mierau & Stephen Turnovsky, 2014. "Capital accumulation and the sources of demographic change," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(3), pages 857-894, July.
    13. Heijdra, Ben J. & Meijdam, Lex, 2002. "Public investment and intergenerational distribution," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 707-735, May.
    14. Bovenberg, A. Lans & Heijdra, Ben J., 1998. "Environmental tax policy and intergenerational distribution," Journal of Public Economics, Elsevier, vol. 67(1), pages 1-24, January.
    15. Warwick J. McKibbin, 2005. "Global Demographic Change And Japanese Macroeconomic Performance," CAMA Working Papers 2005-13, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    16. Bruce, Neil & Turnovsky, Stephen J., 2013. "Social security, growth, and welfare in overlapping generations economies with or without annuities," Journal of Public Economics, Elsevier, vol. 101(C), pages 12-24.
    17. Warwick J. McKibbin & Jeremy Nguyen, 2004. "Modelling Global Demographic Change:Results For Japan," CAMA Working Papers 2004-04, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    18. Brito Paulo & Marini Giancarlo & Piergallini Alessandro, 2016. "House prices and monetary policy," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 20(3), pages 251-277, June.
    19. Pedro R. D. Bom & Aitor Goti, 2018. "Public Capital and the Labor Income Share," Sustainability, MDPI, vol. 10(11), pages 1-17, October.
    20. Dominik Grafenhofer & Christian Jaag & Christian Keuschnigg & Mirela Keuschnigg, 2005. "Probabilistic Aging," University of St. Gallen Department of Economics working paper series 2005 2005-08, Department of Economics, University of St. Gallen.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:60:y:2008:i:1:p:88-121. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/oep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.