Government Budget Deficits in Large Open Economies

Willem Buiter, Anne Sibert and Anne C. Sibert

No 3476, CESifo Working Paper Series from CESifo

Abstract: Large and growing levels of public debt in the United States, United Kingdom, Japan and the Euro Area raise new interest in the cross-country effects of a large open economy’s deficits. We consider a dynamic optimising model with costly tax collection and exogenously given public spending and initial debt. We ask whether the externalities associated with an individual country’s deficits are positive or negative. We characterise the path of taxes in the Nash equilibrium where policy makers act nationalistically and compare this outcome to the global optimal outcome.

Keywords: fiscal policy; international policy coordination; optimal taxation (search for similar items in EconPapers)
JEL-codes: E62 F42 H21 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3476

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