Useful Government Spending, Direct Crowding-Out and Fiscal Policy Interdependence

Giovanni Ganelli

No 269299, Economic Research Papers from University of Warwick - Department of Economics

Abstract: This paper introduces perfect substitutability between private and public consumption in a dynamic, open economy with imperfect competition and nominal rigidities. This implies a direct crowding-out e¤ect that, generalising to the two-country case some well-known properties of a closed economy, tends to reduce consumption following both domestic and foreign expansions. A less expected result is that substitutability has a positive e¤ect on the short-run output spillover. We also show that, if we modify the model to allow for home bias in government spending, temporary fiscal expansions display a ”quasineutrality” property.

Keywords: Agricultural and Food Policy; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 38
Date: 2000-01-01
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Citations: View citations in EconPapers (4)

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Journal Article: Useful government spending, direct crowding-out and fiscal policy interdependence (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269299

DOI: 10.22004/ag.econ.269299

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