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Current-Account Effects of a Temporary Change in Government Expenditure

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  • Slobodan Djajic

Abstract

This paper employs a perfect-foresight model of intertemporal utility maximization in analysing the current-account effects of a temporary increase in government spending. The relationship between the marginal utility of private consumption and the supply of public goods in the economy plays a critical role in determining the qualitative nature of the optimal current-account response. The link between the timing of the policy change and the magnitude of the current-account effect is also examined.

Suggested Citation

  • Slobodan Djajic, 1986. "Current-Account Effects of a Temporary Change in Government Expenditure," Working Paper 677, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:677
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