This paper presents a dynamic stochastic general equilibrium model with nominal rigidities, capital accumulation and finite horizons. Our New Keynesian framework exhibits intergenerational wealth effects and is intended to investigate the macroeconomic implications of fiscal policy, which is specified by either a debt-based tax rule or a balanced-budget rule allowing for temporary deficits. The model predicts that fiscal expansions generate a trade-off in output dynamics between short-term gains and medium-term losses. It is shown that the effects of fiscal shocks crucially depend upon the conduct of monetary policy. Simulation analysis suggests that balanced-budget requirements enhance the determinacy properties of feedback interest rate rules by guaranteeing inflation stabilization.

Annicchiarico, B., Giammarioli, N., Piergallini, A. (2012). Budgetary policies in a DSGE model with finite horizons. RESEARCH IN ECONOMICS, 66(2), 111-130 [10.1016/j.rie.2012.01.001].

Budgetary policies in a DSGE model with finite horizons

ANNICCHIARICO, BARBARA;PIERGALLINI, ALESSANDRO
2012-01-01

Abstract

This paper presents a dynamic stochastic general equilibrium model with nominal rigidities, capital accumulation and finite horizons. Our New Keynesian framework exhibits intergenerational wealth effects and is intended to investigate the macroeconomic implications of fiscal policy, which is specified by either a debt-based tax rule or a balanced-budget rule allowing for temporary deficits. The model predicts that fiscal expansions generate a trade-off in output dynamics between short-term gains and medium-term losses. It is shown that the effects of fiscal shocks crucially depend upon the conduct of monetary policy. Simulation analysis suggests that balanced-budget requirements enhance the determinacy properties of feedback interest rate rules by guaranteeing inflation stabilization.
2012
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/01 - ECONOMIA POLITICA
English
Annicchiarico, B., Giammarioli, N., Piergallini, A. (2012). Budgetary policies in a DSGE model with finite horizons. RESEARCH IN ECONOMICS, 66(2), 111-130 [10.1016/j.rie.2012.01.001].
Annicchiarico, B; Giammarioli, N; Piergallini, A
Articolo su rivista
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/68336
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