Munich Personal RePEc Archive

Liberating Supply: Fiscal Policy and Technological Innovation in a Multicountry Model

Bayoumi, Tamim and Coe, David T. and Laxton, Douglas (1998): Liberating Supply: Fiscal Policy and Technological Innovation in a Multicountry Model.

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Abstract

This paper examines how endogenizing technological progress in a multicountry macroeconometric model affects the analysis of fiscal policies. It uses an expanded version of the IMF's multicountry model, MULTIMOD, in which total factor productivity (TFP) is endogenized as a function of domestic research and development (R&D) expenditures, R&D expenditures of trading partners, and trade. Compared with the standard version of the model with exogenous TFP, fiscal policies have much larger and long-lived effects on the domestic economy and on other countries.

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