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Technological dependence and budgetary policy in an uncertain horizon model of small open economy

Dai, Meixing (1992): Technological dependence and budgetary policy in an uncertain horizon model of small open economy.

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Abstract

It is set up in this paper a formulation which endogeneizes the choice of investment inputs in open economy context where a small country may depend on foreign technology. Then it is integrated into a macroeconomic model of small specialized country with Blanchard-Yaari type uncertain horizon consumers. Contrary to some models with ad hoc formulation, it is found in this model that generally the budgetary policy has eects on the short- and long-run capital stock. The corresponding intertemporal spill-over effects of the budgetary policy, through the supply side of economy on external position, aggregate consumption, real exchange rate and capital evaluation ratio, are also examined.

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