Publication type: Working paper – expertise – study
Title: Economic openness and fiscal multipliers
Authors: Riguzzi, Marco
Extent: 31
Issue Date: 2014
Series: Discussion Papers
Series volume: 14-06
Publisher / Ed. Institution: Universität Bern
Publisher / Ed. Institution: Bern
Language: English
Subjects: Capital mobility; Openness to trade; Exchange rate flexibility; Fiscal multiplier
Subject (DDC): 330: Economics
Abstract: This essay examines the implications of openness to trade, capital mobility, and exchange rate flexibility for the fiscal multiplier. It presents a New Open Economy Macroeconomics model which is extended with the formation of "deep habits" by individual households. Hereby, an inter-temporal substitution effect is constituted, which causes monopolistically competitive producers to move their markups counter-cyclically and generates a positive fiscal multiplier of private consumption. The main outcome is a mechanism elaborating that both openness to trade and exchange rate flexibility limit the fiscal multiplier in equilibrium, and that capital mobility increases the fiscal multiplier in the short run. This dynamic model differs in its implications from a static model, such as the Mundell-Fleming model, and it is consistent with recent empirical findings.
License (according to publishing contract): Licence according to publishing contract
Departement: School of Management and Law
Organisational Unit: Winterthur Institute of Health Economics (WIG)
Appears in collections:Publikationen School of Management and Law

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