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Can Fiscal Policy Improve Welfare in a Small Dependent Economy with Feedback Effects?

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  • Luís Costa

Abstract

I develop an intertemporal general equilibrium two‐sector model for a small dependent economy. Firms in the non‐tradable‐good sector are assumed to be large, both at the industry and the economy levels, and to compete over quantities. The exchange rate is fixed and financial capital is perfectly mobile. I study the effects of government purchases of goods on the macroeconomic short‐ and long‐run equilibria when entry is possible. Sufficient conditions for welfare improvement are also derived.

Suggested Citation

  • Luís Costa, 2001. "Can Fiscal Policy Improve Welfare in a Small Dependent Economy with Feedback Effects?," Manchester School, University of Manchester, vol. 69(4), pages 418-439, September.
    • Handle: RePEc:bla:manchs:v:69:y:2001:i:4:p:418-439
    DOI: 10.1111/1467-9957.00256
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    Cited by:

    1. Luis F Costa & Huw D Dixon, "undated". "A Simple Business-Cycle Model with Schumpeterian Features," Discussion Papers 05/30, Department of Economics, University of York.
    2. Luís F. Costa & Huw Dixon, 2009. "Fiscal Policy under Imperfect Competition: A Survey," Working Papers Department of Economics 2009/25, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    3. Luís F. Costa, 2004. "Endogenous Markups and Fiscal Policy," Manchester School, University of Manchester, vol. 72(s1), pages 55-71, September.
    4. Brito, Paulo B. & Costa, Luís F. & Dixon, Huw, 2013. "Non-smooth dynamics and multiple equilibria in a Cournot–Ramsey model with endogenous markups," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2287-2306.

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