Discussion Paper Details

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Title: Fiscal Policy Interdependence and Efficiency

Author(s): Willem H. Buiter and Kenneth Kletzer

Publication Date: May 1990

Keyword(s): Capital Mobility, Fiscal Policy and Policy Coordination

Programme Area(s): International Macroeconomics

Abstract: This paper uses a two-country overlapping generations model to study the international transmission of fiscal policy among open interdependent economies under free international capital mobility. With only lump-sum taxes and transfers, international transmission involves only pecuniary externalities: barring dynamic inefficiency, only distributional issues (intergenerational and international) are involved. With age-specific taxes and transfers, the ability to run deficits and issue debt does not enhance the choice set of the governments. Source-based taxes on the rentals from capital and residence-based taxes on all property income are also studi.

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Bibliographic Reference

Buiter, W and Kletzer, K. 1990. 'Fiscal Policy Interdependence and Efficiency'. London, Centre for Economic Policy Research.