The Effects of Monetary and Fiscal Policy on Aggregate Demand in a Small Open Economy: An Application of the Structural Error Correction Model Tetsuya Konuki

ISBN: 9786613797308

Published: October 1st 2000

ebook

25 pages


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The Effects of Monetary and Fiscal Policy on Aggregate Demand in a Small Open Economy: An Application of the Structural Error Correction Model  by  Tetsuya Konuki

The Effects of Monetary and Fiscal Policy on Aggregate Demand in a Small Open Economy: An Application of the Structural Error Correction Model by Tetsuya Konuki
October 1st 2000 | ebook | PDF, EPUB, FB2, DjVu, audiobook, mp3, RTF | 25 pages | ISBN: 9786613797308 | 5.78 Mb

The purpose of this paper is to analyze empirically the short-run effects of monetary and fiscal policy on aggregate demand. The small open economy model under flexible exchange rates is estimated. To identify structural monetary and fiscalMoreThe purpose of this paper is to analyze empirically the short-run effects of monetary and fiscal policy on aggregate demand. The small open economy model under flexible exchange rates is estimated.

To identify structural monetary and fiscal disturbances, the two-step structural error correction method is applied as in Ogaki and Yang (1998). Cointegrating vectors are estimated in the first step, and the instrumental variable technique is applied to the system of equations in the second step. This method can overcome the difficulty faced by the standard error correction models (ECMs), as discussed below.



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