A simple model of three economies with two currencies: the eurozone and the USA
AbstractThis paper presents a Keynesian model which describes three countries trading merchandise and financial assets with one another. It is initially assumed that all three countries have independent fiscal policies but that two of the countries share a currency, hence the model can be used to make a preliminary analysis of the conduct of economic policy in 'the eurozone' vis-à-vis the rest of the world--'the USA'. The main conclusion will be that, if all three countries do indeed operate independent fiscal policies, the system will work under a floating currency regime, but only so long as the European central bank is prepared to modify the structure of its assets by accumulating an ever rising proportion of bills issued by any 'weak' euro country. Copyright 2007, Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Cambridge Journal of Economics.
Volume (Year): 31 (2007)
Issue (Month): 1 (January)
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- von Arnim, Rudiger, 2009. "Recession and rebalancing: How the housing and credit crises will impact US real activity," Journal of Policy Modeling, Elsevier, vol. 31(3), pages 309-324, May.
- Jean-Baptiste Gossé, 2009. "The Real and Financial Implications of the Global Saving Glut: A Three-Country Model," CEPN Working Papers hal-00380417, HAL.
- Jean-Baptiste Gossé, 2009. "The Real and Financial Implications of the Global Saving Glut: A Three-Country Model," Working Papers hal-00380417, HAL.
- Greg Hannsgen & Dimitri B. Papadimitriou, 2012. "Fiscal Traps and Macro Policy after the Eurozone Crisis," Economics Public Policy Brief Archive ppb_127, Levy Economics Institute, The.
- Saadaoui, Jamel, 2012.
"Déséquilibres globaux, taux de change d’équilibre et modélisation stock-flux cohérente
[Global Imbalances, Equilibrium Exchange Rates and Stock-Flow Consistent Modelling]," MPRA Paper 51332, University Library of Munich, Germany.
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