Arbeitspapier

Savers, Spenders and Fiscal Policy in a Small Open Economy

This paper analyzes the effects of fiscal policy in an open economy. We extend the savers-spenders theory of Mankiw (2000) to a small open economy with endogenous labor supply. We first show how the Dornbusch (1983) consumption-based real interest rate for open economies is modified when labor supply is endogenous. We then turn to the effects of fiscal policy when there are both savers and spenders. With this heterogeneity taken into account, tax cuts have a short-run contractionary effect on domestic production, and increased public spending has a short-run expansionary effect. Although consistent with recent empirical work, this result contrasts with those of most other theoretical models. Transitory changes in demand have permanent real effects in our model, and we discuss the implications for real exchange-rate dynamics. We also show how rational savers may magnify or dampen the responses of "irrational" spenders, and show how this is related to features of the utility functions.

ISBN
82-7553-275-2
Sprache
Englisch

Erschienen in
Series: Working Paper ; No. 2004/18

Klassifikation
Wirtschaft
Macroeconomics: Consumption; Saving; Wealth
Fiscal Policy
Open Economy Macroeconomics
Thema
rule-of-thumb consumers
fiscal policy
open economy

Ereignis
Geistige Schöpfung
(wer)
Matsen, Egil
Sveen, Tommy
Torvik, Ragnar
Ereignis
Veröffentlichung
(wer)
Norges Bank
(wo)
Oslo
(wann)
2004

Handle
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Matsen, Egil
  • Sveen, Tommy
  • Torvik, Ragnar
  • Norges Bank

Entstanden

  • 2004

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