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Target zones and wealth effects: Current account implications of alternative policy assignments


  • Patrizio Tirelli


This paper evaluates the current-account implications of coordinated disinflationary policy in a two-country framework, when fiscal policy is assigned to control inflation and monetary policy is used to hold down the exchange rate at its “target zone” level. The performance of an alternative regime, where monetary policy controls inflation and fiscal policy is assigned to control the current account is also assessed. Copyright Kluwer Academic Publishers 1991

Suggested Citation

  • Patrizio Tirelli, 1991. "Target zones and wealth effects: Current account implications of alternative policy assignments," Open Economies Review, Springer, vol. 2(1), pages 65-82, February.
  • Handle: RePEc:kap:openec:v:2:y:1991:i:1:p:65-82
    DOI: 10.1007/BF01886135

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    References listed on IDEAS

    1. Kouri, Pentti J K, 1976. " The Exchange Rate and the Balance of Payments in the Short Run and in the Long Run: A Monetary Approach," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 280-304.
    2. Edison, Hali J. & Miller, Marcus H. & Williamson, John, 1987. "On evaluating and extending the target zone proposal," Journal of Policy Modeling, Elsevier, vol. 9(1), pages 199-224.
    3. Whittaker, Rod, et al, 1986. "Alternative Financial Policy Rules in an Open Economy under Rational and Adaptive Expectations," Economic Journal, Royal Economic Society, vol. 96(383), pages 680-695, September.
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