Fiscal Shocks in a Two-Sector Open Economy with Endogenous Markups

Olivier Cardi and Romain Restout ()

Working Papers from HAL

Abstract: We use a two-sector neoclassical open economy model with traded and non-traded goods and endogenous markups to investigate the effects of temporary fiscal shocks. One central finding is that theory can be reconciled with evidence once we allow for endogenous markups and assume that the traded sector is more capital intensive than the non-traded sector. More precisely, while both ingredients are essential to produce the real exchange rate depreciation, only the second ingredient is necessary to account for the simultaneous decline in investment and the current account, in line with the evidence.

Keywords: Non-traded Goods; Fiscal Shocks; Investment; Current Account; Endogenous markup. (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dge, nep-mac and nep-opm
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01252524v1
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: FISCAL SHOCKS IN A TWO-SECTOR OPEN ECONOMY WITH ENDOGENOUS MARKUPS (2015)
Working Paper: Fiscal Shocks in a Two-Sector Open Economy with Endogenous Markups (2015)
Working Paper: Fiscal shocks in a two sector open economy with endogenous markups (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-01252524

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