TWO COUNTRY OLG MODEL ON THE GLOBAL TRANSMISSION OF FISCAL POLICY: Time Preference, Government Debt and Tax Reform in an Open Ec,Used

TWO COUNTRY OLG MODEL ON THE GLOBAL TRANSMISSION OF FISCAL POLICY: Time Preference, Government Debt and Tax Reform in an Open Ec,Used

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This research aims to answer several issues on the global transmission effects of the government fiscal policy. How does the difference in time preferences of individuals affect economic variables in an open economy? How is the government debt or budget deficit of a country transmitted to other countries? Which tax scheme is the best for capital accumulation and welfare of countries? Wage income tax? Capital income tax? Consumption tax? In order to address the issues, this research builds a two country overlappinggenerations (OLG) model in which there exist different time preferences, different fiscal policies, and different tax schemes between countries. In particular, the model adopt a utility function with a constant intertemporal elasticity of substitution, in which saving positively depends on both labor income and the interest rate.

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