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| Author: | Turnovsky, S. J. Sen, P. |
| Title: | Fiscal policy, capital accumulation, and debt in an open economy |
| Journal: | Oxford Economic Papers
1991 : JAN, VOL. 43:1, p. 1-24 |
| Index terms: | FISCAL POLICY CAPITAL GROWTH OPEN ECONOMY DEBT PUBLIC FINANCE MARKETS INVESTMENT |
| Language: | eng |
| Abstract: | The effects of government expenditure policy are analyzed using a two-good model of a (semi-small) open economy. As the focus is on expenditure rather than the details of government finance, the existence of infinitely-lived private agents are assumed when, with competitive markets, the conditions of Ricardian equivalence are known to prevail. A key aspect of the model is that both employment and the rate of capital accumulation are endogenously determined through the intertemporal optimizing behaviour of a representative agent. Investment behaviour is generated by a Tobin q-theoretic function. The convex installation costs ensure that the rate of investment remains finite at all times. |
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