Fiscal Policies and International Financial Markets
In: International Aspects of Fiscal Policies
This paper examines the effects of fiscal policies in an open economy when international financial markets are well developed. Consumers use these markets to hedge against the risk of uncertain future changes in government policies. These portfolio allocations alter the effects of changes in government policies, if and when they occur, as compared to a world with more limited financial markets. Three examples are discussed. The first involves a change in (productive) government spending, financed by a change in lump-sum taxes, in a large open economy with two goods. The second example concerns the effects of temporary changes in distorting taxes. The final example concerns the open-economy effects of changes in government deficits, due to changes in lump-sum taxes, without Ricardian equivalence. In each example the existence of opportunities to trade on well-developed international financial markets is shown to alter, in important ways, the effects of changes in government policies. The empirical significance of these differences should grow as international financial markets continue to develop in breadth and sophistication.
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
7927.||Handle:|| RePEc:nbr:nberch:7927||Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
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.:
- Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
- Stockman, Alan C. & Dellas, Harris, 1986.
"Asset markets, tariffs, and political risk,"
Journal of International Economics,
Elsevier, vol. 21(3-4), pages 199-213, November.
- Cooley, Thomas F & LeRoy, Stephen F & Raymon, Neil, 1984. "Econometric Policy Evaluation: Note," American Economic Review, American Economic Association, vol. 74(3), pages 467-70, June.
- Rosen, Sherwin, 1985.
"Implicit Contracts: A Survey,"
Journal of Economic Literature,
American Economic Association, vol. 23(3), pages 1144-75, September.
- Kormendi, Roger C, 1983. "Government Debt, Government Spending, and Private Sector Behavior," American Economic Review, American Economic Association, vol. 73(5), pages 994-1010, December.
- Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, vol. 49(1), pages 33-64, January.
- Frenkel, Jacob A & Razin, Assaf, 1986. "Fiscal Policies in the World Economy," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 564-94, June.
- Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-27, March.
- Svensson, Lars E O, 1985. "Money and Asset Prices in a Cash-in-Advance Economy," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 919-44, October.
- Olivier J. Blanchard, 1984.
"Debt, Deficits and Finite Horizons,"
NBER Working Papers
1389, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:7927. See general information about how to correct material in RePEc.
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.