Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10477354 | Journal of International Economics | 2005 | 18 Pages |
Abstract
In this paper we introduce an overlapping generations structure of the Blanchard (J. Polit. Econ. 93 (1985) 121) type in a New Open Economy Macroeconomics (NOEM) model. This allows us to study a wider range of fiscal shocks compared to the traditional Mundell-Fleming (MF) and to the baseline Redux models. We show that a debt-financed tax cut appreciates the short-run exchange rate, but this result is reversed in the long run. A debt-financed increase of government spending, on the other hand, has ambiguous exchange rate effects. Our model also provides a bridge between the NOEM framework and the MF model.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Giovanni Ganelli,