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Habit formation and fiscal transmission in open economies

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Habit formation and fiscal transmission in open economies. / Cardi, Olivier; Müller, Gernot.
In: Journal of International Economics, Vol. 85, No. 2, 11.2011, p. 256-267.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Cardi, O & Müller, G 2011, 'Habit formation and fiscal transmission in open economies', Journal of International Economics, vol. 85, no. 2, pp. 256-267. https://doi.org/10.1016/j.jinteco.2011.07.007

APA

Cardi, O., & Müller, G. (2011). Habit formation and fiscal transmission in open economies. Journal of International Economics, 85(2), 256-267. https://doi.org/10.1016/j.jinteco.2011.07.007

Vancouver

Cardi O, Müller G. Habit formation and fiscal transmission in open economies. Journal of International Economics. 2011 Nov;85(2):256-267. Epub 2011 Aug 11. doi: 10.1016/j.jinteco.2011.07.007

Author

Cardi, Olivier ; Müller, Gernot. / Habit formation and fiscal transmission in open economies. In: Journal of International Economics. 2011 ; Vol. 85, No. 2. pp. 256-267.

Bibtex

@article{8eb6cc4f293745358e5d7cf8ae19dfd5,
title = "Habit formation and fiscal transmission in open economies",
abstract = "In this paper we analyze the ability of an open economy version of the neoclassical model to account for the time-series evidence on fiscal policy transmission. Revisiting the evidence, we find that i) government spending raises output, while inducing a simultaneous decline of investment and the current account and ii) the responses of output and investment are more muted in more open economies while current account deficits tend to be larger. Turning to the model, we explore the role of habit formation for fiscal policy transmission. Specifically, we show that the model can account for the evidence if consumption behavior is characterized by habit formation and the terms of trade adjust endogenously.",
keywords = "Investment, Current account, Habit formation, Fiscal policy",
author = "Olivier Cardi and Gernot M{\"u}ller",
year = "2011",
month = nov,
doi = "10.1016/j.jinteco.2011.07.007",
language = "English",
volume = "85",
pages = "256--267",
journal = "Journal of International Economics",
issn = "0022-1996",
publisher = "Elsevier",
number = "2",

}

RIS

TY - JOUR

T1 - Habit formation and fiscal transmission in open economies

AU - Cardi, Olivier

AU - Müller, Gernot

PY - 2011/11

Y1 - 2011/11

N2 - In this paper we analyze the ability of an open economy version of the neoclassical model to account for the time-series evidence on fiscal policy transmission. Revisiting the evidence, we find that i) government spending raises output, while inducing a simultaneous decline of investment and the current account and ii) the responses of output and investment are more muted in more open economies while current account deficits tend to be larger. Turning to the model, we explore the role of habit formation for fiscal policy transmission. Specifically, we show that the model can account for the evidence if consumption behavior is characterized by habit formation and the terms of trade adjust endogenously.

AB - In this paper we analyze the ability of an open economy version of the neoclassical model to account for the time-series evidence on fiscal policy transmission. Revisiting the evidence, we find that i) government spending raises output, while inducing a simultaneous decline of investment and the current account and ii) the responses of output and investment are more muted in more open economies while current account deficits tend to be larger. Turning to the model, we explore the role of habit formation for fiscal policy transmission. Specifically, we show that the model can account for the evidence if consumption behavior is characterized by habit formation and the terms of trade adjust endogenously.

KW - Investment

KW - Current account

KW - Habit formation

KW - Fiscal policy

U2 - 10.1016/j.jinteco.2011.07.007

DO - 10.1016/j.jinteco.2011.07.007

M3 - Journal article

VL - 85

SP - 256

EP - 267

JO - Journal of International Economics

JF - Journal of International Economics

SN - 0022-1996

IS - 2

ER -