Fiscal Policy, Capital Accumulation, and Debt in an Open Economy

Stephen J Turnovsky and Partha Sen

Oxford Economic Papers, 1991, vol. 43, issue 1, 1-24

Abstract: This paper analyzes the effects of changes in government expenditure on both a domestically produced and an imported good in an open economy based on intertemporal optimizing behavior. The dynamic adjustment is characterized in detail and the critical role played by the accumulating capital stock is highlighted. The evolution of the current account is seen to mirror that of capital. The welfare of such policies is also assessed in terms of the intertemporal utility of the representative agent. Both permanent and temporary policy changes are considered, with the latter being shown to have a permanent effect on the economy. Copyright 1991 by Royal Economic Society.

Date: 1991
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Related works:
Working Paper: FISCAL POLICY, CAPITAL ACCUMULATION, AND DEBT IN AN OPEN ECONOMY (1990)
Working Paper: Fiscal Policy, Capital Accumulation, and Debt in an Open Economy (1990)
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