Episodes of War and Peace in an Estimated Open Economy Model

Stéphane Auray and Aurélien Eyquem

No 2016-01, Working Papers from Center for Research in Economics and Statistics

Abstract: We analyze the effects of large war episodes (world wars) on the macroeconomic dynamics of four advanced countries (France, Germany, the UK and the U.S.) by means of an estimated open-economy model. The model allows wars to produce specific effects on the economy through capital depreciation, sovereign default and a military draft. These effects, together with large surges in public spending and debt, and significant drops in labor taxes, account for the bulk of fluctuations during wars. We also use our estimations to discuss the size and state-dependence of output multipliers, and the size of welfare losses from fluctuations.

Keywords: Fluctuations; War; Trade; Taxes; Public Debt; Bayesian estimations; Multipliers; Welfare. (search for similar items in EconPapers)
JEL-codes: E31 E32 E62 F41 H56 H63 (search for similar items in EconPapers)
Pages: 41
Date: 2016-01
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Episodes of war and peace in an estimated open economy model (2019)
Working Paper: Episodes of war and peace in an estimated open economy model (2019)
Working Paper: Episodes of War and Peace in an Estimated Open Economy Model (2017)
Working Paper: Episodes of War and Peace in an Estimated Open Economy Model (2017)
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