Fiscal policy transmission in a non-Ricardian model of a monetary union

Christoph Bierbrauer ()

No 109, IEER Working Papers from Institute of Empirical Economic Research, Osnabrueck University

Abstract: We present an analytically tractable two-country New Open Economy Macroeconomics model of a currency union featuring an overlapping generations structure of the Blanchard (1985)-Yaari (1965) type. It enables us to study the transmission and spillover effects of a wider range of fiscal shocks in comparison to the standard model. We show that, depending on the financing decision of the government, fiscal policy measures can have very different effects on key macroeconomic variables such as consumption and output. Moreover, the spillovers of national fiscal policy depend on the composition of government spending, the type of the fiscal measure and the cross-country substitutability between goods.

Keywords: Overlapping generations; New open economy macroeconomics; Public Debt; Decentralized fiscal policy; Monetary union (search for similar items in EconPapers)
JEL-codes: E62 F33 F41 H31 H50 H63 (search for similar items in EconPapers)
Pages: 45
Date: 2017-10-29
New Economics Papers: this item is included in nep-dge, nep-mac and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:iee:wpaper:wp0109

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