Macroeconomic policy in a small open-economy when government budget deficits are financed by printing money
Citation:
S Murray, 'Macroeconomic policy in a small open-economy when government budget deficits are financed by printing money', Economic and Social Research Institute, Economic and Social Review, Vol.12 (Issue 1), 1980, 1980, pp1-15Download Item:
Abstract:
This paper presents a dynamic macroeconomic model of a small open economy (SOE) in which government budget deficits are financed by printing money, the dynamics arising from a stock-adjustment approach to capital movements and the government's budget constraint. Stability conditions and the medium-term policy multipliers are derived. Fiscal policy raises income in the medium run but an expansionary monetary policy by open market operations (resulting in a fall in the parametric bond stock) reduces income. There are some striking symmetries between fiscal and monetary policies: a one-unit increase in government spending has exactly the same effect on steady-state income, the money stock, and the total bond stock, as a one-unit rise in the stock of government bond.
Author: Murray, S
Publisher:
Economic & Social StudiesType of material:
Journal ArticleCollections
Series/Report no:
Economic and Social ReviewVol.12 (Issue 1), 1980
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Full text availableKeywords:
Small open economies (SOE), IrelandISSN:
0012-9984Metadata
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