Wealth Effects and Fiscal Policy in the National Institute Global Econometric Model∗

Ray Barrell and Jan Willem in't Veld
Authors registered in the RePEc Author Service: Jan in 't Veld

National Institute Economic Review, 1992, vol. 140, 78-85

Abstract: This paper analyses the role of wealth in the National Institute model of the World Economy (NIGEM). It also addresses the issues of fiscal solvency and the rote of the government budget constraint. We start with a brief theoretical and empirical overview of wealth and consumption functions. We then describe the introduction of public sector blocks into the model and summarise our approach to the determination of wealth. The paper then reports on a set of diagnostic simulations using NIGEM. We analyse the effects of a permanent fiscal expansion and its implications. We also discuss the importance of solvency constraints on the government in the solution of a forward looking model without Ricardian equivalence. We then analyse the effects of a change in equity prices in one country relative to those in the rest of the world.

Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:cup:nierev:v:140:y:1992:i::p:78-85_7

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