Effects of Budgetary Policies in Open Economies: The Role of Intertemporal Consumption Substitution

Slobodan Djajic

Working Paper from Economics Department, Queen's University

Abstract: An economy's optimal response to temporary and anticipated future changes in government spending is examined in a two-country model which highlights to role of intertemporal consumption substitution (ICS). The qualitative effects of the two countries coordinating their fiscal policy on each economy's current account, terms of trade, real exchange rate and interest rates depend on the relationship between the domestic and foreign elasticities of ICS.

Pages: 22 pages
Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:675

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