Fiscal shocks in a two sector open economy with endogenous markups
We use a two-sector neoclassical open economy model with traded and non-traded goods and endogenous markups to investigate both the aggregate and the sectoral ef- fects of temporary fiscal shocks. One central finding is that both the sectoral capital intensities and endogenous markups matter in determining the response of key eco- nomic variables. In particular, the model can produce a drop in investment and in the current account, in line with empirical evidence, only if the traded sector is more capital intensive than the non-traded sector. Irrespective of sectoral capital intensities, a fiscal shock raises the relative size of the non-traded sector substantially in the short-run. Additionally, allowing for the markup to depend on the number of competitors, the two-sector model can account for the real exchange rate depreciation found in the data. Finally, markup variations triggered by firm entry can raise the real wage, albeit under certain circumstances, and modify substantially the sectoral composition of GDP in the short-run.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +33 3 68 85 20 69
Fax: +33 3 68 85 20 70
Web page: http://www.beta-umr7522.fr/
More information through EDIRC
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.:
- Olivier Cardi & Romain Restout, 2012.
"Unanticipated vs. Anticipated Tax Reforms in a Two-Sector Open Economy,"
Working Papers of BETA
2012-01, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- Olivier Cardi & Romain Restout, 2014. "Unanticipated vs. Anticipated Tax Reforms in a Two-Sector Open Economy," Open Economies Review, Springer, vol. 25(2), pages 373-406, April.
- Schubert, Stefan F & Turnovsky, Stephen J, 2002. "The Dynamics of Temporary Policies in a Small Open Economy," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 604-22, November.
- Nir Jaimovich, 2004.
"Firm Dynamics, Markup Variations, and the Business Cycle,"
07-013, Stanford Institute for Economic Policy Research, revised Mar 2007.
- Jaimovich, Nir & Floetotto, Max, 2008. "Firm dynamics, markup variations, and the business cycle," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1238-1252, October.
- Claudia Curi & Cinzia Daraio & Patrick Llerena, 2012.
"University technology transfer: how (in)efficient are French universities?,"
Cambridge Journal of Economics,
Oxford University Press, vol. 36(3), pages 629-654.
- Claudia Curi & Cinzia Daraio & Maria Patrick Llerena, 2012. "University Technology Transfer: How (in-)efficient are French universities?," DIS Technical Reports 2012-02, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
- Claudia Curi & Cinzia Daraio & Patrick Llerena, 2012. "University Technology Transfer: How (in-)efficient are French universities?," Working Papers of BETA 2012-02, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- Meixing Dai, 2012. "Static and Dynamic Effects of Central Bank Transparency," Working Papers of BETA 2012-08, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- Julien Pénin, 2012. "Motivation crowding-out: Is there a risk for science?," Working Papers of BETA 2012-13, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
When requesting a correction, please mention this item's handle: RePEc:ulp:sbbeta:2012-17. 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.