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Useful government spending, direct crowding-out and fiscal policy interdependence

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Ganelli, Giovanni (2000) Useful government spending, direct crowding-out and fiscal policy interdependence. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.547).

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Abstract

This paper introduces perfect substitutability between private and public consumption in a dynamic, open economy with imperfect competition and nominal rigidities. This implies a direct crowding-out effect that, generalising to the two-country case some well-known properties of a closed economy, tends to reduce consumption following both domestic and foreign expansions. A less expected result is that sub-stitutability has a positive effect on the short-run output spillover. We also show that, if we modify the model to allow for home bias in government spending, temporary fiscal expansions display a "quasi-neutrality" property.

Item Type: Working or Discussion Paper (Working Paper)
Subjects: H Social Sciences > HJ Public Finance
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Competition, Imperfect, Price maintenance, Consumption (Economics), Fiscal policy
Series Name: Warwick economic research papers
Publisher: University of Warwick, Department of Economics
Place of Publication: Coventry
Official Date: January 2000
Dates:
DateEvent
January 2000Published
Number: No.547
Number of Pages: 38
Status: Not Peer Reviewed
Access rights to Published version: Open Access
Funder: Economic and Social Research Council (Great Britain) (ESRC)
Grant number: R00429924153 (ESRC)

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