Arbeitspapier

Economic openness and fiscal multipliers

Recent empirical findings attribute a central role to the degree of economic openness for determining the size of the fiscal multiplier. However, traditional macroeconomic models have difficulties in accounting for this evidence. It is the purpose of this paper to provide a theoretical framework which is able to attest for the new empirical evidence. To this end, we introduce the formation of "deep habits" into a New Keynesian small open economy model and give an active role to monetary policy. The presence of counter-cyclical firm markups is a crucial ingredient to generating a fiscal multiplier of empirically consistent size which is influenced by openness. We study three dimensions of economic openness: Exchange rate flexibility, trade openness and capital mobility. In line with the empirical findings, we report a negative relationship with the fiscal multiplier.

Sprache
Englisch

Erschienen in
Series: Discussion Papers ; No. 15-04

Klassifikation
Wirtschaft
General Aggregative Models: Keynes; Keynesian; Post-Keynesian
Fiscal Policy
Thema
fiscal multiplier
exchange rate flexibility
openness to trade
capital mobility

Ereignis
Geistige Schöpfung
(wer)
Riguzzi, Marco
Wegmüller, Philipp
Ereignis
Veröffentlichung
(wer)
University of Bern, Department of Economics
(wo)
Bern
(wann)
2015

Handle
Letzte Aktualisierung
05.09.2023, 12:41 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Riguzzi, Marco
  • Wegmüller, Philipp
  • University of Bern, Department of Economics

Entstanden

  • 2015

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