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Gilbert Koenig and Irem Zeyneloglu
''International consumption risk sharing and fiscal policy''
( 2012, Vol. 32 No.2 )
The present paper uses a two-country stochastic general equilibrium model assuming incomplete financial markets and non-separable consumer preferences to show how optimal fiscal responses to an asymmetric productivity shock can mitigate the worsening of the international consumption risk sharing following the shock. It also identifies the conditions under which the gains from fiscal stabilization can be improved by cooperative responses.
Keywords: fiscal policy, international consumption risk sharing, open economy macroeconomics
JEL: E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
F4 - Macroeconomic Aspects of International Trade and Finance: General
Manuscript Received : Mar 14 2012 Manuscript Accepted : Apr 19 2012

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