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The Effectiveness of Fiscal and Monetary Policies under Fixed and Flexible Exchange Rates: Empirical Evidence for Canada, 1950-1970

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  • Martin Prachowny

Abstract

This paper estimates a model of a small open economy using Canadian data to determine the effects of monetary and fiscal policies on real income and the price level for fixed and flexible exchange rates. Reduced-form equations based on a 14-equation model are estimated. Under fixed exchange rates, monetary policy is ineffective and expansionary fiscal policy results in an increase in real income as well as the price level. Under flexible exchange rates, both fiscal and monetary policy affect the two policy goals and a combination of expansionary fiscal and monetary policies will increase real income while holding the price level constant.

Suggested Citation

  • Martin Prachowny, 1975. "The Effectiveness of Fiscal and Monetary Policies under Fixed and Flexible Exchange Rates: Empirical Evidence for Canada, 1950-1970," Working Paper 185, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:185
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    Cited by:

    1. Gancho Ganchev & Ivan Todorov, 2021. "Taxation, government spending and economic growth: The case of Bulgaria," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 7(3), pages 255-266.

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