Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/46459 
Year of Publication: 
2011
Series/Report no.: 
CESifo Working Paper No. 3476
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Large and growing levels of public debt in the United States, United Kingdom, Japan and the Euro Area raise new interest in the cross-country effects of a large open economy's deficits. We consider a dynamic optimising model with costly tax collection and exogenously given public spending and initial debt. We ask whether the externalities associated with an individual country's deficits are positive or negative. We characterise the path of taxes in the Nash equilibrium where policy makers act nationalistically and compare this outcome to the global optimal outcome.
Subjects: 
fiscal policy
international policy coordination
optimal taxation
JEL: 
E62
F42
H21
Document Type: 
Working Paper
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