Liberating Supply-Fiscal Policy and Technological innovation in a Multicountry Model

ByDouglas Laxton, Tamim Bayoumi, David T. Coe

June 1, 1998

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines how endogenizing technological progress in a multicountry macroeconometric model affects the analysis of fiscal policies. It uses an expanded version of the IMF’s multicountry model, MULTIMOD, in which total factor productivity (TFP) is endogenized as a function of domestic research and development (R&D) expenditures, R&D expenditures of trading partners, and trade. Compared with the standard version of the model with exogenous TFP, fiscal policies have much larger and long-lived effects on the domestic economy and on other countries.

Subject: Expenditure, Fiscal policy, National accounts, Private consumption, Production, Public debt, Total factor productivity

Keywords: country TFP, Econometric Models, endogenizing TFP, exogenous TFP, Global, net present value, Private consumption, R&D, R&D expenditure, Technological Progress, Total factor productivity, total factor productivity equation, WP

Pages:
26
Volume:
1998
DOI:
---
Issue:
095
Series:
Working Paper No. 1998/095
Stock No:
WPIEA0951998
ISBN:
9781451851793
ISSN:
1018-5941

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