Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77729
Authors: 
Erauskin, Iñaki
Year of Publication: 
2011
Citation: 
[Journal:] SERIEs - Journal of the Spanish Economic Association [ISSN:] 1869-4195 [Publisher:] Springer [Place:] Heidelberg [Volume:] 2 [Year:] 2011 [Issue:] 2 [Pages:] 233-253
Abstract: 
This paper analyzes the impact of financial openness on the size of the government in a stochastically growing small open economy when public spending is productive and volatility-reducing using a portfolio approach. The main result of the model is that economies that are more open are associated with a smaller productive public sector. The lower risk associated with more open economies due to risk diversification implies that the government is less inclined to increase the scale of its activity to maximize welfarewhen productive spending is also volatility-reducing. The empirical evidence based on a sample of 16OECD countries for the period 19702004 broadly supports the main results of the model, even though some results are mixed.
Subjects: 
financial openness
volatility
size of government
productive spending
JEL: 
F41
F43
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/2.0/
Document Type: 
Article

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