Optimal Fiscal Policy in an Emerging Economy with Credit Constraints: Theory and Application for Poland

Michał Konopczyński

Abstract

In this paper we develop an open-economy endogenous growth model to examine the influence of fiscal policy on the economy in the long run. We allow for public deficit and 5 types of taxes. One of the novel features is separate treatment of interest rates on public and private debt, both of which are linear functions of appropriate debt-to-GDP ratios. Two extreme situations are analyzed: a model of “decentralized economy”, where economic agents do not take into account any externalities, and a model of “benevolent social planner”. We derive the rules of optimal fiscal policy that induce economic agents to internalize all externalities. Theoretical results are illustrated with an empirical analysis for Poland. The optimal values of several fiscal policy instruments for Poland are calculated.
Author Michał Konopczyński (WIiGE / KEM)
Michał Konopczyński,,
- Department of Mathematical Economics
Journal seriesCentral European Journal of Economic Modelling and Econometrics, ISSN 2080-0886, e-ISSN 2080-119X, (B 14 pkt)
Issue year2018
Vol10
No3
Pages169-231
Publication size in sheets3.1
Keywords in Englishoptimal fiscal policy, imperfect capital mobility, credit constraints, production externalities
DOIDOI:10.24425/cejeme.2018.125280
URL http://www.czasopisma.pan.pl/dlibra/publication/125280/edition/109310/content/optimal-fiscal-policy-in-an-emerging-economy-with-credit-constraints-theory-and-application-for-poland-konopczynski-michal
Languageen angielski
Score (nominal)14
Score sourcejournalList
ScoreMinisterial score = 14.0, 03-04-2020, ArticleFromJournal
Publication indicators WoS Citations = 0
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