A new-open-economy-macro model for fiscal policy evaluation
By: prepared by Dennis Botman ... [et al.].
Contributors: Botman, Dennis; International Monetary Fund. Fiscal Affairs Dept.; International Monetary Fund. Research Dept.
Series: IMF working paper -- WP/06/45
Publisher: International Monetary Fund, Fiscal Affairs Dept. and Research Dept.
Published: 2006
Place of publication: Washington, D.C
Language: eng
Number of pages: 44
Subjects: Fiscal policy -- Evaluation -- Econometric models.; Debts, Public -- Econometric models.; Corporations -- Taxation -- Econometric models.; Labor -- Econometric models.; Crowding out (Economics) -- Econometric models.
Other titles: New open economy macro model for fiscal policy evaluation
Description: We develop a New-Open-Economy-Macro model in which Ricardian equivalence does not hold because of (i) distortionary labor and corporate income taxation; (ii) limited asset market participation; and (iii) because the overlapping-generations structure results in a disconnect between current and future generations. We consider a permanent increase in government debt following a cut in labor or corporate income taxes in a small and large open economy. We analyze the sensitivity of the results to the key structural parameters of the model and argue that under plausible assumptions there will be significant crowding-out effects associated with permanent increases in government debt.
Notes: "Prepared by Dennis Botman, Douglas Laxton, Dirk Muir, and Andrei Romanov."

"February 2006."

Includes bibliographical references (p. 23-26).

Also available on the World Wide Web.