The Conduct of Fiscal Policy

1985 ◽  
Vol 113 ◽  
pp. 81-88 ◽  
Author(s):  
David Currie
Keyword(s):  
Exchange Rate ◽  
Fiscal Policy ◽  
Open Economy ◽  
Policy Design ◽  
Macroeconomic Policy ◽  
Policy Rules ◽  
Central Focus ◽  
Policy Appraisal ◽  
Forward Looking

The central focus of this paper is on the conduct of fiscal policy. But the influence of fiscal policy cannot sensibly be examined separately from other aspects of macroeconomic policy, such as monetary, exchange rate and incomes policies. Because of this, we the opportunity to range quite widely. Two broad themes emerge. The first concerns the consequences of consistent forward-looking expectations for the design of policy. The second concerns the global consequences of adopting generally in many countries policy rules designed in the single open economy context. Since policy appraisal is usually conducted in the single economy context, and policy design with consistent expectations is still relatively underdeveloped, it is useful to take stock of these two issues.

scholarly journals KEYNES’ INTERVENTIONIST-REFORMIST ECONOMIC POLICIES

2013 ◽  
Vol 71 (281) ◽  
Author(s):  
Fernando Ferrari Filho ◽  
Fábio Henrique Bittes Terra
Keyword(s):  
Economic Policy ◽  
Exchange Rate ◽  
Fiscal Policy ◽  
Macroeconomic Policy ◽  
Economic Policies ◽  
Modus Operandi ◽  
Fourth Section ◽  
The Third ◽  
Monetary Economies

The article aims at presenting the <em>modus operandi </em>of Keynes’ economic policy –especially fiscal policy, which he reveals as the most important. For that purpose, the article is divided into four sections. First, it starts with a brief introduction. Secondly, it presents an analysis of the dynamic of monetary economies. The third section explores the importance of monetary and exchange rate policies in displaying macroeconomic policy, as well as it presents the Keynes fiscal policy as a counter-cyclical instrument. Lastly, the fourth section offers some final remarks.

Mobile Capital, Domestic Institutions, and Electorally Induced Monetary and Fiscal Policy

2000 ◽  
Vol 94 (2) ◽  
pp. 323-346 ◽  
Author(s):  
William Roberts Clark ◽  
Mark Hallerberg
Keyword(s):  
Exchange Rate ◽  
Fiscal Policy ◽  
Central Bank ◽  
Open Economy ◽  
Capital Mobility ◽  
Formal Model ◽  
Central Bank Independence ◽  
Mobile Capital ◽  
The Exchange Rate ◽  
Monetary And Fiscal Policy

The literature on global integration and national policy autonomy often ignores a central result from open economy macroeconomics: Capital mobility constrains monetary policy when the exchange rate is fixed and fiscal policy when the exchange rate is flexible. Similarly, examinations of the electoral determinants of monetary and fiscal policy typically ignore international pressures altogether. We develop a formal model to analyze the interaction between fiscal and monetary policymakers under various exchange rate regimes and the degrees of central bank independence. We test the model using data from OECD countries. We find evidence that preelectoral monetary expansions occur only when the exchange rate is flexible and central bank independence is low; preelectoral fiscal expansions occur when the exchange rate is fixed. We then explore the implications of our model for arguments that emphasize the partisan sources of macroeconomic policy and for the conduct of fiscal policy after economic and monetary union in Europe.

scholarly journals FISCAL POLICY AND THE REAL EXCHANGE RATE

2016 ◽  
Vol 20 (7) ◽  
pp. 1742-1770 ◽  
Author(s):  
Santanu Chatterjee ◽  
Azer Mursagulov
Keyword(s):  
Exchange Rate ◽  
Fiscal Policy ◽  
Real Exchange Rate ◽  
Open Economy ◽  
Government Spending ◽  
Public Investment ◽  
Private Capital ◽  
Economy Model ◽  
The Real ◽  
Trade Offs

This paper examines the mechanisms through which government spending affects the dynamics of the real exchange rate. Using a two-sector dependent open economy model with intersectoral mobility costs for private capital, we show that public investment generates (i) a nonmonotonic U-shaped adjustment path for the real exchange rate with sharp intertemporal trade-offs and (ii) a crowding-in of private consumption, consistent with stylized facts. The effects of public consumption, however, are in sharp contrast to those of public investment. The effect of government spending on the real exchange rate depends critically on (i) the sectoral composition of public spending, (ii) the underlying financing policy, (iii) the sectoral intensity of private capital in production, (iv) the relative sectoral productivity of public infrastructure, (v) the elasticity of substitution in production, and (vi) intersectoral mobility costs for capital. In deriving these results, we identify conditions under which the predictions of the neoclassical open economy model can be reconciled with empirical regularities. Our results underscore the importance of decoupling the effects of government investment from those of government consumption in understanding the relationship between fiscal policy and the real exchange rate.

The long-run stability of a small, open economy under crawling peg regime

2002 ◽  
Vol 52 (1) ◽  
pp. 57-78
Author(s):  
S. Çiftçioğlu
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Risk Premium ◽  
Small Open Economy ◽  
Exchange Rate Policy ◽  
Price Stability ◽  
Output Stability ◽  
Long Run ◽  
The Exchange Rate ◽  
The Impact

The paper analyses the long-run (steady-state) output and price stability of a small, open economy which adopts a “crawling-peg” type of exchange-rate regime in the presence of various kinds of random shocks. Analytical and simulation results suggest that with the exception of money demand shocks, an exchange rate policy which involves a relatively higher rate of indexation of the exchange rate to price level is likely to lead to the worsening of price stability for all types of shocks. On the other hand, the impact of adopting such a policy on output stability depends on the type of the shock; for policy shocks to the exchange rate and shocks to output demand, output stability is worsened whereas for the shocks to risk premium of domestic assets, supply price of domestic output and the wage rate, better output stability is achieved in the long run.

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