The impact of structural policies on external accounts in infinite-horizon and finite-horizon models
The paper uses the European Commission's QUEST III model to compare the impact of product market reform, labour market re-form and fiscal devaluation on economic activity and external accounts in infinite-horizon and finite-horizon versions of the model for a small open economy in monetary union with tradable and non-tradable sectors. The impact of structural policies on external positions tends to be stronger and more persistent, but also more diverse in the finite-horizon specification because of the impact of structural reforms on financial wealth and its transmission to consumption demand in the finite-horizon setting. The improvement in the net foreign asset position tends to be stronger if structural reforms are accompanied by fiscal consolidation and if countries start with high pre-reform levels of net foreign debt.
|Date of creation:||Dec 2012|
|Contact details of provider:|| Postal: Inter-institutional relations and communication Unit, B-1049 Brussels|
Fax: +32 2 298.08.23
Web page: https://ec.europa.eu/info/departments/economic-and-financial-affairs_en
More information through EDIRC