The impact of structural policies on external accounts in infinite-horizon and finite-horizon models

Lukas Vogel

No 474, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

Abstract: The paper uses the European Commission's QUEST III model to compare the impact of product market reform, labour market re-form and fiscal devaluation on economic activity and external accounts in infinite-horizon and finite-horizon versions of the model for a small open economy in monetary union with tradable and non-tradable sectors. The impact of structural policies on external positions tends to be stronger and more persistent, but also more diverse in the finite-horizon specification because of the impact of structural reforms on financial wealth and its transmission to consumption demand in the finite-horizon setting. The improvement in the net foreign asset position tends to be stronger if structural reforms are accompanied by fiscal consolidation and if countries start with high pre-reform levels of net foreign debt.

JEL-codes: F30 F41 F42 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2012-12
New Economics Papers: this item is included in nep-opm
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Related works:
Journal Article: The Impact of Structural Policies on External Accounts in Infinite-horizon and Finite-horizon Models (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecopap:0474

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