Abstract
This paper employs a stochastic endogenous growth model with productive government expenditure in a small open economy to analyze the optimal fiscal policy. First, a stochastic model of a small open economy is constructed. Second, the equilibrium solutions of the representative agent’s stochastic optimization problem are derived. Third, we obtain the equilibrium solutions of the central planner’s stochastic optimization problem and the optimal government expenditure policy. Finally, the optimal tax policy is characterized.
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This research is supported by the National Natural Science Foundation of China (No. 70271069).
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Wang, H., Hu, S. Productive Government Expenditure in a Stochastically Growing Open Economy. Jrl Syst Sci & Complex 20, 95–107 (2007). https://doi.org/10.1007/s11424-007-9008-3
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DOI: https://doi.org/10.1007/s11424-007-9008-3