International coordination of fiscal deficits

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21 Scopus citations

Abstract

Nearly all existing studies of international coordination of fiscal deficits focus on aggregate demand aspects of the problem. In contrast, this paper adopts a dynamic general equilibrium perspective and emphasizes the public finance side of fiscal deficits. In a world with international capital mobility, the fiscal deficit of any single government affects world interest rates and therefore influences intertemporal resource allocation in all countries. The paper shows that these international externalities may result in inefficiently large fiscal deficits, high interest rates, and low levels of welfare if international policy coordination is absent.

Original languageEnglish (US)
Pages (from-to)347-366
Number of pages20
JournalJournal of Monetary Economics
Volume25
Issue number3
DOIs
StatePublished - Jan 1 1990
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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