Fiscal consolidation under fixed exchange rates
Article Abstract:
We present the `fixed exchange rate' version of the Obstfeld and Rogoff model and analyze the international transmission of fiscal policy shocks. The welfare effects of an unanticipated contraction in government expenditure in the home country are shown to depend crucially on the way in which world money stock is set. If home authorities alone are responsible for pegging the exchange rate, a fiscal adjustment leads to a decrease in the real interest rate, stimulates private consumption and limits the contraction in world output, compared with a situation in which a cooperative scheme is implemented. The model is then used to propose a new interpretation of recent events in the EU countries that have enacted restrictive fiscal policies while pegging their currencies to the DM. [C] 2001 Elsevier Science B.V. All rights reserved. JEL classification: F41; E63; E65 Keywords: Exchange rate regimes: Price rigidities; International transmission; Fiscal policy shocks
Publication Name: European Economic Review
Subject: Economics
ISSN: 0014-2921
Year: 2001
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Equilibrium pollution taxes in a two industry open economy
Article Abstract:
This paper involves strategic implications of environmental policy in case of two international oligopolies when countries take part in an international environmental agreement and have agreed on national target levels for a global pollutant. This set-up permits an analysis of the design of optimal emission taxes across domestic producers. By differentiating taxes between industries with different abatement cost, demand, and number of domestic firms, governments are in a position to raise national net foreign rents, It is argued that a single national emission trading programme encompassing all domestic producers cannot provide the equivalent strategic policy design. [C] 2001 Elsevier Science B.V. All rights reserved. JEL classification: F1; Q2; C7 Keywords: International trade; Industry cost differences; National emission targets; Strategic policy design
Publication Name: European Economic Review
Subject: Economics
ISSN: 0014-2921
Year: 2001
User Contributions:
Comment about this article or add new information about this topic:
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