Articlehybrid1989

Fiscal deficits and relative prices in a growing world economy

97 citations0/0 files storedJournal of Monetary Economics

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Global Financial Crisis and Policies Monetary Policy and Economic Impact Fiscal Policies and Political Economy

Abstract

This paper studies the transmission of fiscal disturbances between countries and the effect of those disturbances on worldwide capital intensity in a context of growth. The model developed to address these issues allows for the production of both nontradable and relatively capital-intensive tradable goods; a central finding is that factor markets can be a major channel for the communication of fiscal policy shocks to world interest rates, to private saving decisions, and, ultimately, to global asset supplies and their distribution among countries. Particular predictions of the model illustrate how changes in public debt ratios and shifts in government spending patterns affect resource allocation and the welfare of various generations, both at home and abroad.

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References

1974Are Government Bonds Net Wealth?1985Debt, Deficits, and Finite Horizons 1989Overlapping families of infinitely-lived agents 1967Ten economic studies in the tradition of Irving Fisher 1983Exchange Rates and International Macroeconomics 1988Death, Birth, Productivity Growth and Debt Neutrality 1981Time Preference and International Lending and Borrowing in an Overlapping-Generations Model 1979Time Preference and International Lending and Borrowing in an Overlapping-Generations Model

Cited by

1991Capital accumulation and the current account in a two-country model 1997Are Business Cycles Different in Asia and Latin America?1995Capital goods imports, the real exchange rate and the current account 1993Terms-of-Trade Disturbances and Fiscal Policy in a Small Open Economy 1993The Growth and Welfare Consequences of Differential Tariffs 1993International transmission of monetary and fiscal policy 2005

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