Re-Examining The Effectiveness Of Stabilisation Policy
AbstractThis paper develops an alternative international macroeconomic model for evaluating the effectiveness of fiscal and monetary policy in stabilising national income under fixed and floating exchange rates. It encompasses national output and income, saving, investment, money and capital flows and linkages between the exchange rate, price levels and real interest rates consistent with international parity conditions. It demonstrates that the nature of government spending is pivotal to the effectiveness of fiscal policy, revealing that, ceteris paribus, higher public consumption expenditure contracts national income and depreciates the exchange rate, whereas higher productive public investment spending has opposite effects. The framework also shows that the effectiveness of fiscal and monetary policy as macroeconomic policy instruments is not ultimately dependent on the exchange rate regime. Copyright 2007 The Author Journal compilation 2007 Blackwell Publishing Ltd/ University of Adelaide and Flinders University .
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Australian Economic Papers.
Volume (Year): 46 (2007)
Issue (Month): 4 (December)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X
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- Brittle, Shane, 2009. "Ricardian Equivalence and the Efficacy of Fiscal Policy in Australia," Economics Working Papers wp09-10, School of Economics, University of Wollongong, NSW, Australia.
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