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Title: |
Dynamics of Macroeconomic Adjustment with Growth: Some Simulation
Results |
| Author: |
Mallick,
Sushanta K. |
| Author
Affiliation: |
Chase Manhattan
Bank, Hong Kong |
| Source: |
International Economic Journal, Spring 2001, v. 15, no. 1, pp. 115-139 |
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Publication Date: |
Spring 2001 |
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Abstract: |
This paper examines the impact of several
macroeconomic policies, both demand and supply management policies, on
economic activity within a small macroeconomic simulation model. The
model is based on a standard analytical framework that underlies
adjustment policies in developing economies (DEs). The standard approach
has been to use aggregate government expenditure as an instrument of
fiscal policy to shock economic activity in a DE, with a negative
dynamic response typically observed. In the context of such a small
macroeconomic simulation model we decompose government expenditure into
consumption and investment expenditure. Simulation exercises with and
without model-consistent expectations throw up some contrasting results
in the sense that fiscal policy can influence output positively through
the effects of public sector investment on private investment in a DE
such as India. |
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