The Review of Regional Studies The Official Journal of the Southern Regional Science Association Two-Region DSGE Analysis of Regionally Targeted Fiscal Policy*

Abstract: In this paper, we explain how to construct a dynamic stochastic general equilibrium model consisting of N regions, and use the two-region version of the model to simulate the effects of fiscal policy on the economy. Our policy simulation shows that the fiscal multiplier depends on which government (local or central) implements the fiscal policy and where the policy is implemented