The paper investigates how changes in fiscal policy can affect relative prices, composition of private consumption, growth and welfare in a two-country, overlapping generations model of endogenous growth. We develop a simple framework that combines Blanchard-type consumers with uncertain lifetimes with an endogenous growth model à la Romer, in which there are production externalities from the capital stock of other firms at home and abroad. The basic insight is to highlight, within an optimizing set-up, the growth and terms of trade effects of fiscal policies, with emphasis on welfare considerations.
|Number of pages||26|
|Journal||Journal of Macroeconomics|
|Publication status||Published - Jun 2000|