Labor-Market Search, Financial Market Integration, and the Fiscal Multiplier

• Type: Article in International Scientific Journal
• Date: 2009

Authors

Cenesiz, MA (Author) FEP; Pierdzioch, C (Author) Other

Journal

Title: Review of International Economics

Vol. 17

Pages: 986-1000

ISSN: 0965-7576

Publisher: Wiley-Blackwell

Indexing

ISI Web of Knowledge - 1 Citation

Scopus - 1 Citation

Other information

Authenticus ID: P-003-EX7

DOI: 10.1111/j.1467-9396.2008.00796.x

Abstract (EN): We used a two-country optimizing "new-open-economy macroeconomics" model to analyze the implications of financial market integration for the fiscal multiplier. The fiscal multiplier measures the accumulated effect of fiscal policy on output. Our model features a labor-market friction in the form of labor-market search. The conventional wisdom derived from the basic textbook version of the classic Mundell-Fleming model has been that financial market integration diminishes the fiscal multiplier. We show that labor-market search implies that financial market integration should increase rather than decrease the fiscal multiplier.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 15