Capital Mobility and the Effectiveness of Fiscal Policy in Open Economies

Christian Pierdzioch

No 1164, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper uses a dynamic general equilibrium two-country optimizing 'new-open economy macroeconomics? model to analyze the consequences of international capital mobility for the effectiveness of fiscal policy. Conventional wisdom suggests that higher capital mobility diminishes the effectiveness of fiscal policy. The model laid out in this paper provides an example that a higher degree of capital mobility can also increase the effectiveness of fiscal policy. This tends to be the case if the stance of monetary policy can be described by means of a simple monetary policy rule.

Keywords: Fiscal policy; Capital mobility; Financial market integration; Monetary Policy (search for similar items in EconPapers)
JEL-codes: F36 F41 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Capital mobility and the effectiveness of fiscal policy in open economies (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1164

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