Template-Type: ReDIF-Paper 1.0
Author-Name: Patrizio  Lecca
Author-Name-First: Patrizio 
Author-Name-Last: Lecca
Author-Email: patrizio.lecca@strath.ac.uk
Author-Workplace-Name: Department of Economics, Strathclyde University
Author-Name: Peter  McGregor
Author-Name-First: Peter 
Author-Name-Last: McGregor
Author-Email: p.mcgregor@strath.ac.uk
Author-Workplace-Name: Fraser of Allander Institute, Strathclyde University
Author-Name: Kim  Swales
Author-Name-First: Kim 
Author-Name-Last: Swales
Author-Email: j.k.swales@strath.ac.uk
Author-Workplace-Name: Department of Economics, University of Strathclyde
Title: Balanced Budget Government Spending in a Small Open Regional Economy
Abstract: This paper investigates the impact of a balanced budget fiscal policy expansion in a regional context within a numerical dynamic general equilibrium model. We take Scotland as an example where, recently, there has been extensive debate on greater fiscal autonomy. In response to a balanced budget fiscal expansion the model suggests that: an increase in current government purchase in goods and services has negative multiplier effects only if the elasticity of substitution between private and public consumption is high enough to move downward the marginal utility of private consumers; public capital expenditure crowds in consumption and investment even with a high level of congestion; but crowding out effects might arise in the short-run if agents are myopic.
Length: 40 pages
Creation-Date: 2010-10
Revision-Date: 
Publication-Status: 
File-URL: http://www.strath.ac.uk/media/1newwebsite/departmentsubject/economics/research/researchdiscussionpapers/10-20.pdf
File-Format: Application/pdf
Number: 1020
Classification-JEL: H72; R13; R50
Keywords: regional computable general equilibrium analysis, fiscal federalism, fiscal policy.
Handle: RePEc:str:wpaper:1020