Ramsey policies in a small open economy with sticky prices and capital

Stéphane Auray, Beatriz de Blas () and Aurélien Eyquem

Journal of Economic Dynamics and Control, 2011, vol. 35, issue 9, 1531-1546

Abstract: This paper analyzes jointly optimal fiscal and monetary policies in a small open economy with capital and sticky prices. We allow for trade in consumption goods under perfect international risk-sharing. We consider balanced-budget fiscal policies where authorities use distortionary taxes on labor and capital together with monetary policy using the nominal interest rate. First, as long as a symmetric equilibrium is considered, the steady state in an open economy is isomorphic to that of a closed economy. Second, sticky prices' allocations are almost indistinguishable from flexible prices allocations both in open and closed economies. Third, the open economy dimension delivers results that are qualitatively similar to those of a closed economy but with significant quantitative changes. Tax rates are both more volatile and more persistent to undo the distortions implied by terms of trade fluctuations.

Keywords: Small; open; economy; Sticky; prices; Optimal; monetary; and; fiscal; policies (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188911000959
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Ramsey Policies in a Small Open Economy with Sticky Prices and Capital (2011)
Working Paper: Ramsey Policies in a Small Open Economy with Sticky Prices and Capital (2011)
Working Paper: Ramsey Policies in a Small Open Economy with Sticky Prices and Capital (2011)
Working Paper: Ramsey Policies in a Small Open Economy with Sticky Prices and Capital (2011)
Working Paper: Ramsey Policies in a Small Open Economy with Sticky Prices and Capital (2010)
Working Paper: Ramsey Policies in a Small Open Economy with Sticky Prices and Capital (2010)
Working Paper: Ramsey Policies in a Small Open Economy with Sticky Prices and Capital (2010)
Working Paper: Ramsey Policies in a Small Open Economy with Sticky Prices and Capital (2010)
Working Paper: Ramsey Policies in a Small Open Economy with Sticky Prices and Capital (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:35:y:2011:i:9:p:1531-1546

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().