Brief Survey of the Literature
As a starting point take the classic papers by Fleming (1962) and Mundell (1963, 1964, 1968). They discuss monetary and fiscal policy in an open economy characterized by perfect capital mobility. The exchange rate can either be flexible or fixed. They consider both the small open economy and the world economy made up of two large countries.
KeywordsExchange Rate Fiscal Policy Monetary Union Currency Area Small Open Economy
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