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The New Open Economy Macroeconomics of Government Debt

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  • Ganelli, Giovanni

    (Trinity College Dublin)

Abstract

In this paper we introduce an overlapping generations structure of the Blanchard (1985) 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 (Obstfeld and Rogoff 1995, 1996) 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 the Dollar vis-a-vis the Euro. In contrast, the imposition of fiscal constraints such as the ``Golden Rule'' proposed by the UK government can have opposite exchange rate effects.

Suggested Citation

  • Ganelli, Giovanni, 2003. "The New Open Economy Macroeconomics of Government Debt," Royal Economic Society Annual Conference 2003 83, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:83
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    References listed on IDEAS

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    More about this item

    Keywords

    Overlapping generations; new open economy macroeconomics; debt; tax cut;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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