- B.J. Heijdra
- A life-cycle overlapping-generations model of the small open econonmy
- Oxford Economic Papers
- Publication Year
- 88 - 121
- Document type
- article in journal
- Faculty of Economics and Business
- Amsterdam School of Economics Research Institute (ASE-RI)
We construct an overlapping generations model for the small open economy incorporating a realistic description of the mortality process. With age-dependent mortality, the typical life-cycle pattern of consumption and saving results from the maximizing behaviour of individual households. Our ‘Blanchard-Yaari-Modigliani’ model is used to analytically study a number of typical shocks affecting the small open economy, namely a balanced-budget public spending shock, a temporary Ricardian tax cut, and an interest rate shock. The demographic details matter a lot—both the impulse-response functions and the welfare profiles (associated with the different shocks) are critically affected by them. These demographic details furthermore do not wash out in the aggregate. The model is flexible and can be applied to a wide variety of theoretical and policy issues.
- go to publisher's site
If you believe that digital publication of certain material infringes any of your rights or (privacy) interests, please let the University Library know, stating your reasons. In case of a legitimate complaint the University Library will make the material inaccessible and/or remove it from the website. Please send an e-mail to: email@example.com, or a letter to: Bibliotheek van de Universiteit van Amsterdam, Dept. Electronic Services, UvA-DARE, Singel 425, 1012 WP Amsterdam, The Netherlands. You will be contacted as soon as possible.