International consumption risk sharing and fiscal policy

Gilbert Koenig and Irem Zeyneloglu ()

Economics Bulletin, 2012, vol. 32, issue 2, 1250-1260

Abstract: The present paper uses a two-country stochastic general equilibrium model assuming incomplete financial markets and non-separable consumer preferences to show how optimal fiscal responses to an asymmetric productivity shock can mitigate the worsening of the international consumption risk sharing following the shock. It also identifies the conditions under which the gains from fiscal stabilization can be improved by cooperative responses.

Keywords: fiscal policy; international consumption risk sharing; open economy macroeconomics (search for similar items in EconPapers)
JEL-codes: E6 F4 (search for similar items in EconPapers)
Date: 2012-04-19
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