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| Author: | Kawai, M. Maccini, L. |
| Title: | Twin deficits versus unpleasant fiscal arithmetic in a small open economy |
| Journal: | Journal of Money, Credit and Banking
1995 : AUG, VOL. 27:3, p. 639-658 |
| Index terms: | OPEN ECONOMY FISCAL POLICY BANKING |
| Language: | eng |
| Abstract: | The purpose of this paper is to study the dynamic behavior of fiscal deficits, current account imbalances, and the exchange rate in a small open economy under flexible exchange rates. The authors are interested in the following specific questions: Suppose the government cuts taxes or increases its expenditures today and finances the resulting deficits by selling bonds to the public. What patterns of adjustment will the economy experience with respect to fiscal deficits, the current account, the exchange rate, and consumption-saving behaviour? |
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