@article{Terms-of-Trade:656,
      recid = {656},
      author = {Macklem, Tiff},
      title = {Terms-of-Trade Disturbances and Fiscal Policy in a Small  Open Economy},
      publisher = {Bank of Canada},
      address = {1990},
      pages = {1 online resource (37 pages)},
      abstract = {This paper examines the steady-state and dynamic effects  of shifts in the terms of trade and the level of the  government debt in a growing, resource-based, small open  economy. The study is based on a simulation model that is  loosely calibrated to Canadian data. The model describes a  small country that produces non-tradables and resources,  and imports manufactured goods. Consumers optimize over  their expected lifetime and do not care about the  well-being of future generations. Consequently, Ricardian  equivalence does not hold, and fiscal policy can have real  effects by altering the mix of current and future taxes and  deficits. Profit-maximizing, non-tradable-goods and  resource-producing firms use inputs of labour, capital and  resources, and face costs of adjusting capital. In general,  the results highlight the role played by asset prices and  the real exchange rate in the transmission of  terms-of-trade and government debt shocks to investment and  production decisions in both sectors, the importance of  general equilibrium considerations, and the intertemporal  aspects of consumer and firm behaviour in a dynamic  setting.},
      url = {http://www.oar-rao.bank-banque-canada.ca/record/656},
      doi = {https://doi.org/10.34989/swp-1990-7},
}