Application of the IS-MP-IA Model to the Slovene Economy and Policy Implications
AbstractThis article extends the IS-MP-IA model (Romer, 2000) and applies the GARCH process (Engle, 1982, 2001) to study output variations in Slovenia. Equilibrium GDP in Slovenia is found to have a positive relationship with real depreciation and the world output and a negative relationship with the federal funds rate and the expected inflation rate. The insignificant coefficient of real deficit spending suggests that the Ricardian-equivalence theory may hold for Slovenia. Although real depreciation is expected to help net exports, its relatively small value indicates that it would be appropriate to pursue a stable exchange rate policy.
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Bibliographic InfoArticle provided by Camera di Commercio di Genova in its journal Economia Internazionale / International Economics.
Volume (Year): 58 (2005)
Issue (Month): 2 ()
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IS-MP-IA; GARCH; real depreciation; expected inflation; budget deficit; world interest rates and output;
Find related papers by JEL classification:
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
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- Szomolányi Karol & Lukáčik Martin & Lukáčiková Adriana, 2011. "Effect of Monetary Intervention in the Frame of IS-LM Model with Dynamic Price Adjustment and Adaptive Expectations," Politická ekonomie, University of Economics, Prague, University of Economics, Prague, vol. 2011(1), pages 47-57.
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