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Fiscal Policy in the New Open Economy; Macroeconomics and Prospects for Fiscal Policy. Coordination; CEPS Working Document No. 193, June 2003

Coutinho, Leonor. (2003) Fiscal Policy in the New Open Economy; Macroeconomics and Prospects for Fiscal Policy. Coordination; CEPS Working Document No. 193, June 2003. [Working Paper]

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    Abstract

    This paper reviews the analysis of fiscal policy in the new open economy macroeconomics literature, in view of increasing interest in the question of transmission and coordination of policies across countries, stirred by developments in this literature and by the formation of the euro area. The analysis focuses on two main points: (i) the identification of welfare spillover effects to third countries; and (ii) the assessments made so far of the potential gains from pursuing non-cooperative and cooperative fiscal stabilisation policies. Regarding welfare spillovers, some additional results are derived to examine whether the exchange rate regime (flexible or fixed) matters for the size of these spillovers, and whether the type of policy pursued (balanced-budget or debtfinanced) matters. Fixed exchange rates only seem to postpone the costs from the short to the long run, but the type of policy is crucial in determining the welfare impact of fiscal expansions. With respect to policy coordination, attention is drawn to the need to reflect on a potential role for fiscal policy as a stabilisation tool, and on possible interactions between fiscal and monetary policy.

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > monetary policy
    EU policies and themes > Policies & related activities > economic and financial affairs > fiscal policy
    EU policies and themes > Policies & related activities > social policy > welfare state
    EU policies and themes > Policies & related activities > economic and financial affairs > EMU/EMS/euro
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > CEPS Working Documents
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 04 Oct 2009
    Page Range: p. 48
    Last Modified: 15 Feb 2011 18:16
    URI: http://aei.pitt.edu/id/eprint/11670

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