International Fiscal Policy Transmission
1986 (English)Report (Other academic)
The paper examines international transmission of stochastic fiscal policy disturbances in a two-country general equilibrium framework, with possible excess supply equilibria with underutilization of resources. Nominal goods prices are sticky, although optimally set by firms in monopolistic competition. Asset prices are flexible. Agents have rational expectations. The spillover effect on foreign output of a domestic fiscal expansion differs from the standard positive Mundell-Fleming one, and depends on whether home and foreign goods are Edgeworth-Pareto complements or substitutes, which in turn depends on the relative size of intertemporal and intratemporal elasticities of substitution in consumption.
Place, publisher, year, edition, pages
Stockholm: IIES , 1986. , 41 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 372
IdentifiersURN: urn:nbn:se:su:diva-41553OAI: oai:DiVA.org:su-41553DiVA: diva2:331163