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Profits, markups and entry: fiscal policy in an open economy

Coto-Martinez, J. and Dixon, Huw David 2003. Profits, markups and entry: fiscal policy in an open economy. Journal of Economic Dynamics and Control 27 (4) , pp. 573-597. 10.1016/S0165-1889(01)00062-8

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In this paper, we develop a general model of an imperfectly competitive small open economy. There is a traded and non-traded sector, whose outputs are combined in order to produce a single final good that can be either consumed or invested. We make general assumptions about preferences and technology, and analyze the impact of fiscal policy on the economy. We find that the fiscal multiplier is between zero and one, and provide sufficient conditions for it to be increasing in the degree of imperfect competition. We also are able to compare the multiplier under free-entry and with a fixed number of firms and welfare. A simple graphical representation of the model is developed.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Uncontrolled Keywords: Imperfect competition; Open economy; Fiscal policy
Publisher: Elsevier
ISSN: 0165-1889
Last Modified: 04 Jun 2017 01:47

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