This paper analyses the macroeconomic effects of fiscal policy in a small open economy in a flexible exchange rate regime. The key result is that the effects of fiscal policy depend on the size of the elasticity of substitution between traded and nontraded goods. In particular, the sign of the current account response to fiscal policy depends on the interplay between the intertemporal elasticity of aggregate consumption and the elasticity of substitution between traded and nontraded goods. The paper also shows that only permanent fiscal expansions generate current account imbalances while temporary fiscal expansions do not affect the current account.
Ministry of Transport and Communications appointed a Working Group on 18.9.2001 for specifying the basic level of for road and railway network. task of the Working Group was to determine the basic level of for road and railway network, which is the level of that is necessary to secure balanced regional development. Working Group was assigned to evaluate the impacts of different factors contributing to the level of service, prepare a proposal for the basic level of of road and railway network and examine the cost effects of this proposal. Working Group should also consider street network in its work. needs of citizens, business life and regions as well as the social conditions (environment, safety etc.) have constituted the starting point for the task of the Working Group. basic level of for mobility and transports has been derived from these needs. Finally, it has been evaluated what kind of transport infrastructure services will secure this basic level of service. In addition to the basic level of service, the required measures and the costs of a higher level of service have also been evaluated. Working Group made a distinction between the minimum level of service, the basic level of service, the preferred level of and the special level of service. minimum level of should always be secured. basic level of should be the next to be achieved, then proceeding on to the preferred level of service. special level of will be decided on separately. Working Group has defined the basic level of as follows: The basic level of for transport network operations will enable regional and community development by meeting the common mobility and transport needs of population, business life and regional functions in a sustainable way. Transport infrastructure services, which secure the basic level of for mobility and transports, can be divided into basic transport infrastructure management or maintaining daily basic level of (maintenance of road and railway network, traffic management, replacement investments and acute new investments) and the development of transport network (securing of the basic level of in the long run). Additional financing of about 10-15% will be needed in basic transport infrastructure management for achieving the basic level of service. preferred level of would require about 30-40% of additional financing. need for new transport network investments will be estimated separately later. This report is available at http://www.mintc.fi or http://www.mintc.fi/www/sivut/dokumentit/julkaisu/julkaisusarja/2003/a032003.htm
The aim of this paper is to examine the implications of jealousy for the welfare eects of monetary policy. Jealousy implies that consump- tion is like pollution: overconsumption may occur because households do not internalize the costs of their consumption on others. This ex- ternality opens the door for a bene…cial monetary policy intervention. We show that the welfare eects of monetary policy depend on the relative strength of the consumption externality and the monopolistic distortion. If households are too jealous, a rise in the money supply reduces welfare by increasing consumption that is already ine¢ciently high.
This paper focuses on the macroeconomic and budgetary impact of tax reforms in a New Keynesian two-country model. Our results show that both income and consumption unilateral tax rate reductions do not constitute a free lunch, in the sense that they have negative budgetary consequences for the country which implements them. In addition, the degree of self-financing implied by our model is in the 8½-24 percent range. Since the degree of self-financing estimated in previous literature was larger, we conclude that in our model not only the lunch is not free, but is also not that cheap. A comparison of alternative (income-tax versus consumption-tax based) fiscal stimulus packages shows that consumption tax cuts imply a larger short-run impact on domestic output but the income tax cuts stimulate the domestic economy more in the long run. We also look at the implications of a revenue-neutral tax reform in which consumption taxes are increased to compensate for lower income tax collection.
This paper focuses on the macroeconomic and budgetary impact of tax reforms in a New Keynesian two-country model. Our results show that both income and consumption unilateral tax rate reductions do not constitute a free lunch, in the sense that they have negative budgetary consequences for the country which implements them. In addition, the degree of self-financing implied by our model is in the 8½-24 percent range. Since the degree of self-financing estimated in previous literature was larger, we conclude that in our model not only the lunch is not free, but is also not that cheap. A comparison of alternative (income-tax versus consumption-tax based) fiscal stimulus packages shows that consumption tax cuts imply a larger short-run impact on domestic output but the income tax cuts stimulate the domestic economy more in the long run. We also look at the implications of a revenue-neutral tax reform in which consumption taxes are increased to compensate for lower income tax collection.
This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.This paper focuses on the trade-off faced by governments in deciding the allocation of public expenditures between productivity-enhancing public infrastructures and utility-enhancing public consumption.From the modeling point of view, the paper augments a standard New Open Economy Macroeconomics (NOEM) model by introducing productive public infrastructures.The results show that a temporary increase in the domestic stock of public capital financed by a reduction in public consumption reduces domestic welfare in the short run because the temporary gains from higher productivity do not compensate domestic residents for the utility loss due to lower public consumption.If the policy shift is permanent domestic utility is likely to increase, while foreign residents suffer short-run welfare losses but benefit from welfare gains in the long run.This analysis implies that a permanent domestic reallocation of public spending might result in a virtuous global technological cycle.
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