European Parliament Library

Public Spending Management and Macroeconomic Interdependence, Giovanni Ganelli

This paper studies, in the context of a New Open Economy Macroeconomics (NOEM) model, the effects of "public competition policies" aimed at improving the efficiency of public spending. Such measures are modeled as an increase in the price elasticity of public consumption. The paper finds that public competition policies significantly affect macroeconomic interdependence across countries. Following a domestic fiscal expansion, an higher public price elasticity increases the substitutability between goods purchased by the domestic and the foreign governments. The same exchange rate variation can therefore sustain larger shifts in relative demand for goods. The expenditure-switching effect is magnified, implying a larger change in relative output. In welfare terms, countries with a larger government sector have an incentive to promote public competition policies
Table Of Contents
""Contents""; ""I. INTRODUCTION""; ""II. THE MODEL""; ""A. The Domestic Representative Agent""; ""B. The Government""; ""C. Firms""; ""D. Current Account Equations""; ""E. Optimality Conditions""; ""F. The Initial Steady State""; ""G. Log-linearization""; ""III. THE EFFECTS OF PUBLIC COMPETITION POLICIES""; ""A. Calibration of the Parameters""; ""B. Positive Effects""; ""IV. WELFARE EFFECTS""; ""V. CONCLUSIONS""; ""REFERENCES""
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (22 p.)
Specific Material Designation
Form Of Item

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