How Should Macroeconomic Policy Respond to Foreign Financial Crises?
This paper examines the impact of global financial crises on the Australian economy and how monetary and fiscal policy may be used to manage economic downturns that result. To do so, it presents a straightforward analytical framework incorporating financial wealth, exchange rate expectations, foreign demand and interest rate risk to analyse the key role played by the nominal exchange rate in insulating national income from the worst effects of foreign financial crises. In the event the economy is not fully insulated by exchange rate depreciation, it shows that, in principle, monetary policy is a superior instrument to fiscal stimulus for restoring aggregate demand to the full employment level. Since monetary policy is not handicapped by numerous problems that render fiscal stimulus less effective, it should normally be considered a sufficient instrument on its own. Copyright (c) 2010 The Economic Society of Australia.
(This abstract was borrowed from another version of this item.)
|Date of creation:||Jun 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (07) 3875-5364
Fax: (07) 3875-7750
Web page: http://www.griffith.edu.au/business-commerce/griffith-business-school/departments/department-accounting-finance-economics
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:gri:epaper:economics:201006. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Professor Tom Nguyen)
If references are entirely missing, you can add them using this form.