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| Author: | Hjelm, G. |
| Title: | Effects of fiscal contractions: The importance of preceding exchange rate movements |
| Journal: | Scandinavian Journal of Economics
2002 : SEP, VOL. 104:3, p. 423-441 |
| Index terms: | Fiscal policy Exchange rates Money supply European Monetary System Theories Models |
| Freeterms: | EMS EMU |
| Language: | eng |
| Abstract: | In the paper, the importance of exchange rate and money supply movements for the macroeconomic outcome of fiscal contractions are examined. The paper finds: 1. contractions associated with a favourable macroeconomic outcome have been preceded by significantly higher real depreciations as compared to contractions associated with a less favourable macroeconomic outcome, and 2. contractions preceded by real depreciations improve expectations about future income and generate higher private consumption growth. Policy implications for countries both outside and inside the EMU are discussed. |
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