The Effects of Fiscal Policy in a Neoclassical Growth Model PDF Download
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Author: Michael Dotsey
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper studies the effects of fiscal policies--depicted as stochastic changes in government spending and distortionary tax rates--when the government is constrained from using lump sum taxes for achieving intertemporal budget balance. The ratio of debt to gnp, therefore, has consequences for the future choices of government spending and distortionary taxation and hence affects real economic activity. Further modeling fiscal policy in this way generates results that differ substantially from those in standard stochastic models where lump sum taxes are used for budget balance. The modeling of fiscal policy presented here is also consistent with empirical evidence on U.S. fiscal policy.
Author: Michael Dotsey
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper studies the effects of fiscal policies--depicted as stochastic changes in government spending and distortionary tax rates--when the government is constrained from using lump sum taxes for achieving intertemporal budget balance. The ratio of debt to gnp, therefore, has consequences for the future choices of government spending and distortionary taxation and hence affects real economic activity. Further modeling fiscal policy in this way generates results that differ substantially from those in standard stochastic models where lump sum taxes are used for budget balance. The modeling of fiscal policy presented here is also consistent with empirical evidence on U.S. fiscal policy.
Author: Michael Dotsey
Publisher:
ISBN:
Category : Fiscal policy
Languages : en
Pages : 68
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Book Description
Author: Mr.Vito Tanzi
Publisher: International Monetary Fund
ISBN: 1451854129
Category : Business & Economics
Languages : en
Pages : 36
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Book Description
This paper discusses in a systematic and comprehensive way the existing literature on the relationship between the growth of countries’ economies and various public finance instruments, such as tax policy, expenditure policy, and overall budgetary policy, from the perspectives of allocative efficiency, macroeconomic stability, and income distribution. It reviews both the conceptual linkages between each of the instruments and growth and the empirical evidence on such relationships. It broadly concludes that fiscal policy could play a fundamental role in affecting the long-run growth performance of countries.
Author: Ellen R. McGrattan
Publisher:
ISBN:
Category : Economic history
Languages : en
Pages : 66
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Book Description
There is much debate about the usefulness of the neoclassical growth model for assessing the macro-economic impact of fiscal shocks. We test the theory using data from World War II, which is by far the largest fiscal shock in the history of the United States. We take observed changes in fiscal policy during the war as inputs into a parameterized, dynamic general equilibrium model and compare the values of all variables in the model to the actual values of these variables in the data. Our main finding is that the theory quantitatively accounts for macroeconomic activity during this big fiscal shock.
Author: Michał Konopczyński
Publisher:
ISBN:
Category :
Languages : en
Pages : 12
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Book Description
We examine the long-run impact of fiscal policy on economic growth under the conditions of an economic and monetary union (EMU). The analysis is based on the neoclassical growth model of a small (in economic terms) open economy in an EMU. The core assumptions are perfect capital mobility, which results in identical interest rates across the EMU, and perfect mobility of goods, which leads to the convergence of price levels. The model is based on standard neoclassical assumptions, i.e., the output is determined by the Cobb-Douglas production function with a Harrodneutral technical progress and constant returns to scale, capital and labor receive their marginal products, etc. We show that a unique long-run equilibrium exists and is characterized by the socalled natural rate of growth. The necessary and sufficient conditions of global asymptotic stability form a system of three non-trivial inequalities. We argue that in modern economies, these conditions are satisfied, except perhaps for very short periods of time. Furthermore, we show that the golden rules of fiscal policy have the form of an alternative optimal policy that crucially depends on the relation between the real interest rate and the natural rate of growth and on the relations between five other autonomous parameters.
Author: Richard Hemming
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 62
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Book Description
This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1498344658
Category : Business & Economics
Languages : en
Pages : 257
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Book Description
This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.
Author: Paweł Dykas
Publisher: Taylor & Francis
ISBN: 1000774813
Category : Business & Economics
Languages : en
Pages : 265
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Book Description
In 1956, Solow proposed a neoclassical growth model in opposition or as an alternative to Keynesian growth models. The Solow model of economic growth provided foundations for models embedded in the new theory of economic growth, known as the theory of endogenous growth, such as the renowned growth models developed by Paul M. Romer and Robert E. Lucas in the 1980s and 90s. The augmentations of the Solow model described in this book, excepting the Phelps golden rules of capital accumulation and the Mankiw-Romer-Weil and Nonneman-Vanhoudt models, were developed by the authors over the last two decades. The book identifies six spheres of interest in modern macroeconomic theory: the impact of fiscal and monetary policy on growth; the effect of different returns to scale on production; the influence of mobility of factors of production among different countries on their development; the effect of population dynamics on growth; the periodicity of investment rates and their influence on growth; and the effect of exogenous shocks in the form of an epidemic. For each of these issues, the authors construct and analyze an appropriate growth model that focuses on the description of the specific macroeconomic problem. This book not only continues the neoclassical tradition of thought in economics focused on quantitative economic change but also, and to a significant extent, discusses alternative approaches to certain questions of economic growth, utilizing conclusions that can be drawn from the Solow model. It is a useful tool in analyzing contemporary issues related to growth.
Author: Oliviero Antonio Carboni
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper analyses the effect of public expenditures in a modified Solow model of capital accumulation with optimizing agents. The model identifies optimal government size and composition of public expenditures which maximize the rate of growth in the dynamics to the steady state and the long-run level of per capita income. Different allocations of public resources lead to different growth rates in the transitional dynamics depending on their elasticities. However effects from fiscal policy are only temporary. Finally we argue that neglecting the non-linear nature of the relationship between government spending and growth may lead empirical studies to biased results.
Author: William Easterly
Publisher:
ISBN:
Category : Economic development
Languages : en
Pages : 72
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Book Description
