Hostname: page-component-cd9895bd7-dk4vv Total loading time: 0 Render date: 2024-12-22T18:03:25.326Z Has data issue: false hasContentIssue false
  • English
  • Français

Wealth Effects and Fiscal Policy in the National Institute Global Econometric Model∗

Published online by Cambridge University Press:  26 March 2020

Ray Barrell  and
Jan Willem in't Veld
Get access Rights & Permissions [Opens in a new window]

Extract

This paper analyses the role of wealth in the National Institute model of the World Economy (NIGEM). It also addresses the issues of fiscal solvency and the rote of the government budget constraint. We start with a brief theoretical and empirical overview of wealth and consumption functions. We then describe the introduction of public sector blocks into the model and summarise our approach to the determination of wealth. The paper then reports on a set of diagnostic simulations using NIGEM. We analyse the effects of a permanent fiscal expansion and its implications. We also discuss the importance of solvency constraints on the government in the solution of a forward looking model without Ricardian equivalence. We then analyse the effects of a change in equity prices in one country relative to those in the rest of the world.

Type
Articles
Information
National Institute Economic Review , Volume 140 , May 1992 , pp. 78 - 85
Copyright
Copyright © 1992 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This note draws on Barrell, Gurney and In't Veld 1991. This research was financed by ESRC grant no WB 01 25 0022. We would like to thank Mike Artis, Andrew Britton, David Currie, Stephen Hall, Garry Young, Peter Westaway and John Whitley for useful comments on this work. They are in no way implicated by our results.

References

Anderton, R.Barrell, R. and In't Veld, J., (1992), ‘Forward looking wages, and the analysis of monetary union’, paper presented at SPES Warwick Conference, forthcoming in Barrell, R and Whitley, J (eds.) Macroeconomic Policy Coordination in Europe: the ERM and Monetary Union.Google Scholar
Barrell, R.Gurney, A. and In't Veld, JW, (1991), ‘The introduction of wealth into a model of the world economy’, paper presented at MMB Conference, Warwick, July 1991.Google Scholar
Barrell, R.Gurney, A. and In't Veld, JW, (1992), ‘Real exchange rates, fiscal policy and the role of wealth: an analysis of equilibrium in a monetary union’, Journal of Forecasting, forthcoming.CrossRefGoogle Scholar
Barrell, R. and In't Veld, JW, (1992a), ‘Consumption and models of the world economy’, DIW Quarterly Review, March 1992.Google Scholar
Barrell, R. and In't Veld, JW, (1992b), ‘A cross country analysis of consumption and wealth effects’, mimeo.Google Scholar
Barro, R. and Grossman, H., (1971), ‘A general disequilibrium model of income and employment’, American Economic Review, 61, 82–93.Google Scholar
Blanchard, O., Chouraqui, JC, Hagerman RP, and Sartor, N., (1990), ‘The sustainability of fiscal policy: new answers to an old question’, OECD Economic Studies, 15.Google Scholar
Currie, D., Levine, P., (1991), ‘The solvency constraint and fiscal policy in an open economy’. Chapter 3 in External Constraints on Macroeconomic Policy: The European Experience Alogoskoufis, G, Papademos, L, and Portes, R (eds.), CEPR London.Google Scholar
Gurley, J. and Shaw, E., (1960), Money in a Theory of Finance, Washington, Brookings Institution.Google Scholar
Hall, RE, (1978), ‘Stochastic implications of the life cycle-permanent income hypothesis’, Journal of Political Economy, Vol 186.Google Scholar
Hey, JD, (1980), ‘Optimal Consumption under income uncertainty’ Economic Letters, vol 5.CrossRefGoogle Scholar
Masson, P., Symansky, S. and Meredith, G. (1990), ‘Multimod Mark II: A Revised and Extended Model’, IMF Occasional Paper 71 Washington DC.Google Scholar
Masson, P., Symansky, S., (1992), ‘Evaluating policy regimes under imperfect credibility’, in Bryant et al (ed.): Evaluating Policy Regimes: New Research in Empirical Macro Economics, Brookings.Google Scholar
NIGEM Model Manual, NIESR, May 1992.Google Scholar
Whitley, J., (1992), ‘Common policy simulations’, paper presented at SPES Warwick conference March 1992, forthcoming in Barrell, R and Whitley, J (eds.) Macroeconomic Policy Coordination in Europe: the ERM and Monetary Union.Google Scholar