Fiscal Policy, Capital Accumulation, and Debt in an Open Economy
This paper analyzes the effects of changes in government expenditures on both a domestically produced and an imported good in an open economy based on intertemporal optimizing behavior. The dynamic adjustment is characterized in detail and the critical role played by the accumulating capital stock is highlighted. The evolution of the current account is seen to mirror that of capital. The welfare of such policies is also assessed in tans of the intertemporal utility of the representative agent. Both permanent and temporary policy changes are considered, with the latter being shown to have a permanent effect on the economy.
|Date of creation:||Oct 1990|
|Publication status:||published as Oxford Economic Papers, Vol. 43, No. 1, pp. 1-24, March 1991.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- J. P. Gould, 1968. "Adjustment Costs in the Theory of Investment of the Firm," Review of Economic Studies, Oxford University Press, vol. 35(1), pages 47-55.
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"Tariffs, Capital Accumulation, and the Current Account in a Small Open Economy,"
NBER Working Papers
2781, National Bureau of Economic Research, Inc.
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