The impact of structural policies on external accounts in infinite-horizon and finite-horizon models

• Autores: Lukas Vogel
• Localización: Economic papers, ISSN 1725-3187, Nº. 474, 2012, págs. 1-38
• Idioma: inglés
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• Resumen

  • The paper uses the European Commission's QUEST III model to compare the impact of product market reform, labour market re-form and fiscal devaluation on economic activity and external accounts in infinite-horizon and finite-horizon versions of the model for a small open economy in monetary union with tradable and non-tradable sectors. The impact of structural policies on external positions tends to be stronger and more persistent, but also more diverse in the finite-horizon specification because of the impact of structural reforms on financial wealth and its transmission to consumption demand in the finite-horizon setting. The improvement in the net foreign asset position tends to be stronger if structural reforms are accompanied by fiscal consolidation and if countries start with high pre-reform levels of net foreign debt