DP419 Fiscal Policy Interdependence and Efficiency
|Author(s):||Willem H. Buiter, Kenneth Kletzer|
|Publication Date:||May 1990|
|Keyword(s):||Capital Mobility, Fiscal Policy, Policy Coordination|
|JEL(s):||024, 111, 411, 441|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=419|
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.