Benigno, Gianluca and De Paoli, Bianca (2010) On the international dimension of fiscal policy. Journal of Money, Credit and Banking, 42 (8). 1523 - 1542. ISSN 0022-2879
Full text not available from this repository.Abstract
This paper analyzes the international dimension of fiscal policy in a small open economy framework. We consider the case in which the government finances its spending by levying distortionary taxes and issuing state-contingent debt. While in a closed economy taxes are essentially invariant, in an open economy taxes can be as volatile as output. This is because the presence of a terms of trade externality introduces efficient fluctuations in the consumption-leisure wedge driven by movements in the real exchange rate. As a result, the optimal fiscal rule suggests that taxes should be varied to replicate these fluctuations.
| Item Type: | Article |
|---|---|
| Official URL: | https://onlinelibrary.wiley.com/journal/15384616 |
| Additional Information: | © 2010 The Ohio State University. |
| Divisions: | Economics |
| Subjects: | H Social Sciences > HJ Public Finance |
| JEL classification: | E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics |
| Date Deposited: | 14 Mar 2011 16:41 |
| Last Modified: | 14 Jun 2025 05:36 |
| URI: | http://eprints.lse.ac.uk/id/eprint/33344 |
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