Stabilization policy under flexible exchange rates and liquidity |
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Authors: | C. L. Lackman |
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Affiliation: | (1) Rutgers University, USA |
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Abstract: | Summary A two country model under flexible exchange rates is developed. The model shows that changes in the interest rate resulting from monetary or fiscal expansion has indeterminant effects on prices, output, capital flows and liquidity demand for money under conditions of a less than full employment equilibrium. Stabilization policy recommendations previously respected in this context fall under suspicion. |
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