Efficiency wages, 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: Journal of International Money and Finance

Vol. 28

Pages: 853-867

ISSN: 0261-5606

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 2 Citations

Scopus - 3 Citations

Other information

Authenticus ID: P-003-G8S

DOI: 10.1016/j.jimonfin.2008.08.013

Abstract (EN): We used a "new-open economy macroeconomic" model featuring a labor-market friction in the form of efficiency wages to analyze the implications of financial market integration for the fiscal multiplier. The fiscal multiplier measures the accumulated effect of fiscal Policy On Output. Conventional wisdom based on the basic textbook version of the classic Mundell-Fleming model suggests that the fiscal multiplier should become smaller as financial markets become more integrated. We show that a labor-market friction in the form of efficiency wages implies that financial market integration should increase the fiscal multiplier.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 15