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Compositional Effects of Government Spending in a Two-Country Two-SectorProduction Model / Steven N. Durlauf, Robert W. Staiger.
- Format:
- Book
- Author/Creator:
- Durlauf, Steven N.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w2543.
- NBER working paper series no. w2543
- Language:
- English
- Subjects (All):
- Government spending policy.
- Mathematical models.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1988.
- Cambridge : National Bureau of Economic Research, 1988.
- Summary:
- This paper explores the impact of changes in the composition of government spending on the level of relative prices, interest rates and the current account in a two country, two period Heckacher-Ohlii model. We show that shifting the composition of government spending affects macroeconomic variables according to the relative factor intensities of tradeable and non-tradeable goods. Adjustments of composition towards non-tradeables will raise (lower) world interest rates if non-tradeables are capital (labor) intensive. The announcement of a future shift towards non-tradeables will induce a current account deficit (surplus) if future interest rates are expected to increase (decrease). The introduction of production thus places restrictions on the co-movements of fiscal policy and macroeconomic variables beyond those generated by preferences.
- Notes:
- Print version record
- March 1988.
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