Effects of Budgetary Policies in Open Economies: The Role of Intertemporal Consumption Substitution
1986 (English)Report (Other academic)
An economy's optimal response to temporary and anticipated future changes in government spending is examined in the context of a two-country model which highlights the role of the elasticity of intertemporal consumption substituion (ICS). Soecial attention is devoted to the case in which both governments pursue identical policy measures. The qualitative effects of such measures on an economy's current account, its terms of trade (in a two-commodity world), and its real exchange and interest rate (in a world with non-traded goods) are shown to depend on the relationship between the domestic and the foreign elasticity of ICS.
Place, publisher, year, edition, pages
Stockholm: IIES , 1986. , 22 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 356
IdentifiersURN: urn:nbn:se:su:diva-41536OAI: oai:DiVA.org:su-41536DiVA: diva2:331086
Published in connection with a visit at the IIES.2010-07-212010-07-212010-07-21