Suchergebnisse

This book examines the causes, consequences and policy significance of international capital movements and nations' external account imbalances. Traditional theoretical approaches to balance of payments analysis, such as the classical, elasticities, absorption, monetary and Mundell-Fleming models are critically evaluated against an extended international macroeconomic accounting framework. More meaningful capital theoretic models then link saving, investment and foreign capital movements to highlight the macroeconomic gains from international capital mobility and international trade in saving.

This paper presents a simple framework for analysing the operation and effectiveness of monetary policy in open economies in the spirit of aggregative approaches that are the mainstay of intermediate macroeconomic theory. Combining standard macroeconomic relations with precepts from international finance, it provides new lessons for the conduct of monetary policy under inflation targeting. It first confirms the classic Mundell‐Fleming result that monetary policy is only effective as a short run stabilization instrument under floating exchange rates, yet goes further in showing that countercyclical monetary policy is incompatible with inflation targeting under fixed exchange rates. Second, it highlights the importance of anchoring inflation expectations as a means of inflation control. Third, it suggests how central banks should react to changes in the monetary stance abroad. Lastly, it demonstrates how monetary policy should respond to productivity improvement at home under floating exchange rates.

This article theoretically examines the impact of different forms of government spending on national income in a financially open economy with a significant net international investment position the central bank of which sets domestic interest rates to target inflation. It shows that whether government spending is expansionary or contractionary ultimately depends on the productivity of that expenditure, a result that has major implications for the efficacy of fiscal policy deployed for either stimulus or austerity reasons. The key prediction of the model is that public consumption and unproductive public investment are procyclical, whereas only productive public investment is countercyclical. (JEL F41)

AbstractThis paper critiques the revival of fiscal activism by the G20 in response to the global financial crisis of 2008–9. It first re‐examines the international macroeconomic conditions leading up to that crisis, before highlighting the paradoxes and pitfalls of revived fiscal activism for advanced economies. It argues that the harmful legacy of budget deficits and escalated public debt levels spawned further financial crises, most notably in southern Europe, and generally damaged household and business confidence to the detriment of private consumption and investment spending, which has delayed economic recovery. To undertake the repair necessary to the fiscal accounts of most advanced economies, the paper proposes that government spending programmes need to be thoroughly reviewed against the key principles of public finance.

This article presents a new framework for analyzing the simultaneous determination of current account imbalances and the path of national income. Using standard macroeconomic behavioral relationships, it first examines how and why current account deficits matter by investigating links between domestic consumption, government spending, output, saving, investment, interest rates, and capital flows. Central to the model is the distinction between aggregate output and expenditure that enables dissection of the effects of discretionary fiscal change on the current account and national income. The framework yields results relevant to the twin deficits hypothesis that are contrary to those of standard models. (JEL E10, F32)

Australia has experienced one of the fastest growing public debt levels in the world post‐Global Financial Crisis due to a series of large federal budget deficits driven by high government spending. In this paper we examine the balance sheet implications of this escalating public debt, before proposing some macro‐fiscal objectives for determining its sustainable level. These objectives are to (i) restore the federal government's solvency; (ii) eliminate foreign public debt; and (iii) achieve budgetary balance over the business cycle. Empirically, we first examine how much fiscal consolidation is required for debt stabilisation at current levels, before considering what sized budget balances are needed to achieve the target debt to GDP ratios consistent with the proposed objectives. The results show that no target debt to GDP level consistent with the optimal levels will be met on current fiscal settings in the medium term. This implies significantly greater fiscal consolidation is required to minimise future fiscal risk.