Intertemporal Budget Policies and Macroeconomic Adjustment in Indebted Open Economies

Bianconi, Marcelo and Fisher, Walter H. (June 2011) Intertemporal Budget Policies and Macroeconomic Adjustment in Indebted Open Economies. IHS Economics Series 271

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Abstract or Table of Contents

Abstract: We analyze the role of government intertemporal budget policies in a growing open economy including nominal assets in the presence of an upward sloping supply of debt. This introduces transitional dynamics that influence the effects of government policy instruments on the long term fiscal liability. In particular, shifts in capital income taxes can lead to dynamic scoring effects through the evolution of foreign debt. We show that a combination of tax-cumexpenditure, or government expenditure alone can balance the long term government budget constraint. However, for certain combinations of parameter values, the capital income tax alone cannot balance the intertemporal budget.;

Item Type: IHS Series
Keywords: 'Government budget constraint' 'Nominal assets' 'Capital income tax'
Classification Codes (e.g. JEL): E5, E6, F4
Status: Published
Date Deposited: 26 Sep 2014 10:39
Last Modified: 25 Jul 2017 18:36
URI: http://irihs.ihs.ac.at/id/eprint/2066

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