Useful government spending, direct crowding-out and fiscal policy interdependence
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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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|
|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|Status:||Not Peer Reviewed|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)|
 Aoki, M., (1981) Dynamic Analysis of Open Economies. New York: Academic Press
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