Episodes of War and Peace in an Estimated Open Economy Model

Stéphane Auray and Aurélien Eyquem

No 1708, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: We analyze the effects of world wars on the macroeconomic dynamics of the U.S., France, Germany, and the UK, by means of an estimated open-economy model. The model allows wars to affect the economy through capital depreciation, sovereign default, a military draft, household preferences, and spillovers on other exogenous processes (productivity, investment, trade, policy variables). If the bulk of fluctuations during war episodes can be explained by the rise in government spending in the U.S., other factors are crucial in other countries. We also discuss the size and state-dependence of public spending multipliers, and a counterfactual welfare exercise.

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)
Date: 2017
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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 (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:gat:wpaper:1708

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