English, Article, Journal or magazine article edition: Permanent vs Temporary Fiscal Expansion in a Two-Sector Small Open Economy Model Olivier Cardi; Romain Restout

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Bookmark: http://trove.nla.gov.au/version/200380
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Permanent vs Temporary Fiscal Expansion in a Two-Sector Small Open Economy Model
Author
  • Olivier Cardi
  • Romain Restout
Physical Description
  • preprint
Notes
  • RePEc:hal:journl:halshs-00174574_v1
  • This contribution shows that the duration of a fisscal shock together with sectoral capital intensity matter in determining the dynamic and steady-state effects in an intertemporal-optimizing two-sector small open economy model. First, unlike a permanent shock, net foreign asset position always worsens in the long-run after a transitory fiscal expansion. Second, steady-state changes in physical capital depend on sectoral capital-labor ratios but their signs may be reversed compared to the corresponding permanent public policy. Third, investment and the current account may now adjust non monotonically. Fourth, a temporary fiscal shock always crowds-out (crowds-in) investment in the long-run whenever the non traded (traded) sector is more capital intensive.
  • current account, government spending, nontraded goods, temporary shocks
  • RePEc:gat:wpaper:0720
Language
  • English
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