Fiscal Deficits and Intergenerational Welfare in Almost Small Open Economies.
The intergenerational welfare effects of government deficits are examined in a simple life-cycle economy which can borrow at given interest rates and import at given prices but has unexploited market power in exports. Despite perfect capital market integration, a deficit-financed tax cut to the current young causes an immediate real exchange rate of return on domestic assets. Subsequently, the real exchange rate depreciates to a lower steady-state value, and the after-tax wage decreases by more than the tax increase needed to service the larger deficit.
Year of publication: |
1996
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Authors: | Burgess, David F. |
Published in: |
Canadian Journal of Economics. - Canadian Economics Association - CEA. - Vol. 29.1996, 4, p. 885-909
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Publisher: |
Canadian Economics Association - CEA |
Saved in:
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