Mundell-Fleming: A Criticism or the Multiplier Liveth

William Oliver Coleman ()

Working Papers from Tasmania - Department of Economics

Abstract: The irrelevance of expenditure shocks to nominal product in the Mundell-Fleming model disappears once "real balances" are taken to mean the nominal money stock deflated by the consumer price index, rather than the GDP deflator. Under this alternative definition of real balances there is a government spending multiplier, even in the presence of floating exchange rates and perfect capital mobility.

Keywords: MONEY; EXCHANGE RATE; NATIONAL INCOME; PRICE INDEXES (search for similar items in EconPapers)
JEL-codes: E20 E23 E30 E31 (search for similar items in EconPapers)
Date: 1996

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Persistent link: http://EconPapers.repec.org/RePEc:fth:tasman:1996-04

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