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

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  • Edmund S. Phelps

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.

Suggested Citation

  • Edmund S. Phelps, 1986. "The Significance of Customers Markets for the Effects of Budgetary Policy in Open Economies," Annals of Economics and Statistics, GENES, issue 3, pages 101-117.
    • Handle: RePEc:adr:anecst:y:1986:i:3:p:101-117
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    File URL: http://www.jstor.org/stable/20075617
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    Cited by:

    1. Jean-Paul Fitoussi & Edmund S. Phelps, 1987. "Politique économique aux Etats-Unis et croissance du chômage en Europe," Revue de l'OFCE, Programme National Persée, vol. 18(1), pages 123-147.
    2. repec:spo:wpmain:info:hdl:2441/5951 is not listed on IDEAS
    3. Froot, Kenneth A & Klemperer, Paul D, 1989. "Exchange Rate Pass-Through When Market Share Matters," American Economic Review, American Economic Association, vol. 79(4), pages 637-654, September.
    4. repec:hal:spmain:info:hdl:2441/5951 is not listed on IDEAS

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