Monetary and Fiscal Policy Under Perfect Foresight: A Symmetric Two Country Analysis
This paper analyzes the effects of anticipated and unanticipated domestic monetary and fiscal expansions on both the domestic and foreign economies. The analysis is based on symmetric behavior, which is not only not an unreasonable first approximation, but also offers significant analytical advantages. Specifically, it enables the dynamics of the system to be decoupled into (a) averages and (b) differences of relevant variables. Not only does this render the analysis tractable, but it also helps provide economic insight. One striking aspect is that the differences, but not the averages, respond to announcements. The consequences of this for the dynamic adjustments of the two economies to the various disturbances are discussed at length.
|Date of creation:||Sep 1985|
|Publication status:||published as Turnovsky, Stephen J. "Monetary and Fiscal Policy Under Perfect Foresight: A Symmetric Two Country Analysis," Economica, Vol. 53, No. 210, May 1986,pp. 139-157.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Buiter,Willem H. & Marston,Richard C., 1986. "International Economic Policy Coordination," Cambridge Books, Cambridge University Press, number 9780521337809, May.
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- Gray, Malcolm R & Turnovsky, Stephen J, 1979. "The Stability of Exchange Rate Dynamics under Perfect Myopic Foresight," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(3), pages 643-660, October.
- Canzoneri, Matthew B & Gray, Jo Anna, 1985. "Monetary Policy Games and the Consequences of Non-cooperative Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 547-564, October.
- Gilles Oudiz & Jeffrey Sachs, 1985. "International Policy Coordination in Dynamic Macroeconomic Models," NBER Chapters,in: International Economic Policy Coordination, pages 274-330 National Bureau of Economic Research, Inc.
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