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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
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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

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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

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