Fiscal Policy in an Imperfectly Competitive Dynamic Small Open Economy
In this paper we develop a general model of an imperfectly competitive small open economy. There is a traded and non-traded sector, whose outputs are combined in order to produce a single final good that can be either consumed or invested. We make general assumptions about preferences and technology, and analyse the impact of fiscal policy on the economy. We find that the fiscal mutiplier is between zero and one, and provide sufficient conditions for it to be increasing in the degree of imperfect competition. We also are able to compare the multiplier under free-entry and with a fixed number of firms, the speed of convergence to equilibrium and welfare. A simple graphical representation of the model is developed.
Authors: | Coto-Martinez, Javier ; Dixon, Huw |
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Institutions: | Department of Economics and Related Studies, University of York |
Subject: | imperfect competition | open economy | fiscal policy |
Saved in:
freely available
Extent: | application/pdf |
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Series: | |
Type of publication: | Book / Working Paper |
Language: | English |
Classification: | E20 - Consumption, Saving, Production, Employment, and Investment. General ; E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation ; F4 - Macroeconomic Aspects of International Trade and Finance |
Source: |
Persistent link: https://www.econbiz.de/10005695818
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