Analysis centres on a Keynesian two-country model with imperfect substitution between home and foreign goods, uncovered interest parity, augmented Phillips curve, wealth effects, current-account dynamics and intertemporal budget constraints for private agents and governments. Human wealth is assumed to depend on current income. The short-run multipliers for fiscal policy have the familiar Mundell-Fleming properties augmented by 'news' effects arising from jumps in the exchange rate, but the long-run multipliers are driven by the dynamics of wealth accumulation. A variety of policy experiments is discussed. © 1992.
Bosco, L. (1992). The Current Account and The Budget Deficit in an Interdependent World. EUROPEAN JOURNAL OF POLITICAL ECONOMY, 8(2), 213-230 [10.1016/0176-2680(92)90022-9].
The Current Account and The Budget Deficit in an Interdependent World
Bosco, Luigi
1992-01-01
Abstract
Analysis centres on a Keynesian two-country model with imperfect substitution between home and foreign goods, uncovered interest parity, augmented Phillips curve, wealth effects, current-account dynamics and intertemporal budget constraints for private agents and governments. Human wealth is assumed to depend on current income. The short-run multipliers for fiscal policy have the familiar Mundell-Fleming properties augmented by 'news' effects arising from jumps in the exchange rate, but the long-run multipliers are driven by the dynamics of wealth accumulation. A variety of policy experiments is discussed. © 1992.
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https://hdl.handle.net/11365/37799
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