This essay examines the implications of openness to trade, capital mobility, and exchange rate exibility for the fiscal multiplier. It presents a New Open Economy Macroeconomics model which is extended with the formation of 'deep habits' by individual households. Hereby, an inter-temporal...

This essay examines the implications of openness to trade, capital mobility, and exchange rate flexibility for the fiscal multiplier. It presents a New Open Economy Macroeconomics model which is extended with the formation of "deep habits" by individual households. Hereby, an inter-temporal...