American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Fiscal Consolidation in an Open Economy
American Economic Review
vol. 102,
no. 3, May 2012
(pp. 186–91)
Abstract
his paper uses a New Keynesian DSGE model of a small open economy to compare how the effects of fiscal consolidation differ depending on whether monetary policy is constrained by currency union membership or by the zero lower bound on policy rates. We show that there are important differences in the impact of fiscal shocks across these monetary regimes that depend both on the duration of the zero lower bound and on features that determine the responsiveness of inflation.Citation
Erceg, Christopher J., and Jesper Lindé. 2012. "Fiscal Consolidation in an Open Economy." American Economic Review, 102 (3): 186–91. DOI: 10.1257/aer.102.3.186JEL Classification
- E62 Fiscal Policy
- F41 Open Economy Macroeconomics
- F42 International Policy Coordination and Transmission
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian
- E52 Monetary Policy