Egil, Matsen; Tommy, Sveen; Ragnar, Torvik - In: The B.E. Journal of Macroeconomics 7 (2007) 1, pp. 1-35
This paper extends the savers-spenders theory of Mankiw (2000) to analyze fiscal policy in a small open economy with endogenous labor supply. It is first shown that tax cuts have a short-run contractionary effect on domestic production, and increased public spending has a short-run expansionary...