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Fiscal Policy in a Small Open Economy with Oil Sector and non-Ricardian Agents

Andres Gonzalez (), Martha López (), Norberto Rodríguez N. () and Santiago Téllez ()

Revista Desarrollo y Sociedad, 2014

Abstract: In this paper we develop a dynamic stochastic general equilibrium fiscal model for the Colombian economy. The model has three main components: the existence of non-Ricardian households, price and wage rigidities, and a fiscal authority that finances government spending partly with public debt. The model is calibrated to capture the empirical evidence on the macroeconomic effects of government spending and it is used to study the effect of an oil price shock under different fiscal policy rules. Our results show that fiscal multipliers in Colombia are positive in a way consistent with the evidence. Our analysis also shows that a structural fiscal rule delivers a better outcome in terms of macroeconomic volatility relative to a balanced budget rule or a countercyclical fiscal rule.

Keywords: Fiscal multipliers; fiscal policy rules; non-Ricardian households DSGE model (search for similar items in EconPapers)
JEL-codes: D91 E21 E62 (search for similar items in EconPapers)
Date: 2014
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Related works:
Working Paper: Fiscal Policy in a Small Open Economy with Oil Sector and non-Ricardian Agents (2013) Downloads
Working Paper: Fiscal Policy in a Small Open Economy with Oil Sector and non-Ricardian Agents (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:col:000090:013296

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