The Significance of Customers Markets for the Effects of Budgetary Policy in Open Economies

Edmund Phelps

Annals of Economics and Statistics, 1986, issue 3, 101-117

Abstract: A new model of the small open economy is constructed in which home producers operate in an international "customer market". Increased public expenditure on home output causes the home real interest rate to rise, boosting the velocity of money. It may also cause home firms to shave their mark-ups, thus boosting the real supply of money. Hence employment is up, at first. But the boom is followed by a slump.

Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1986:i:3:p:101-117

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