Fiscal Policy in a New Keynesian Overlapping Generations Model of a Small Open Economy

Etsuro Shioji (Department of Economics, Hitotsubashi University), Vu Tuan Khai (Faculty of Economics, Seikei University), Hiroko Takeuchi (Ph.D. student, International Graduate School of Social Sciences, Yokohama National University (on leave))

要旨Abstract

　This paper introduces three features into an otherwise standard model of “New Open Economy Macroeconomics” of a small open economy, and analyzes effects of a fiscal expansion. Those three features are: (1) Presence of non-tradable goods, (2) Biases toward domestically produced goods, especially non-tradable goods, in government expenditure, and (3) an overlapping generations (OLG) structure a la Blanchard (1985), Yaari (1965), and, more closely related, Ganelli (2005). We show that biases toward non-tradable goods in fiscal spending makes large differences in the effects of a fiscal expansion on output. We also show that, in the presence of the OLG structure, an increase in public spending causes consumption to rise and the exchange rate to appreciate at the same time, under some reasonable parameter settings.

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書誌情報Bibliographic information

Vol. 62, No. 1, 2011 , pp. 30-43
HERMES-IR（一橋大学機関リポジトリ）: https://doi.org/10.15057/22308
JEL Classification Codes: E12, E62, F41