AN ANALYTICAL APPLICATION OF THE MUNDELL–FLEMING MODEL FOR STUDYING OPEN-ECONOMY INTERACTION BETWEEN FISCAL AND MONETARY POLICY

Dimitar Zlatinov ()
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Dimitar Zlatinov: Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski

Yearbook of the Faculty of Economics and Business Administration, Sofia University, 2018, vol. 16, issue 1, 125-144

Abstract: The paper aims to demonstrate the analytical application of the Mundell-Fleming model for studying the effectiveness of monetary and fiscal policy under different exchange rate regimes. The systematic study of the analytical structure of the model, which very often is presented primarily graphically, and introduction to some aspects of the interaction between fiscal and monetary policy reveal the fundamental economic theory character of the model that even developed on Keynesian assumptions may serve to justify non-Keynesian effects when considering an open economy and endogenous real exchange rate. Moreover, the model could be an appropriate method to analyze the transmission mechanism of macroeconomic policies, which goes far beyond traditional views of its application.

Keywords: Mundell–Fleming model; fiscal and monetary policy mix; open economy (search for similar items in EconPapers)
Date: 2018
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