Effects of Fiscal Policy under Different Capital Mobility

Ping Han


Mundell-Fleming model is a standard open macroeconomic theory that tries to describe the effects of fiscal and monetary policies. It is believed that, under assumptions of small country and perfect capital mobility, fiscal policy is strong under fixed exchange rate while monetary policy is strong under floating exchange rate. This article extends assumptions of this theory, discusses effects of fiscal policy in a big, open economy under different capital mobility situations.

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DOI: https://doi.org/10.5430/afr.v3n1p111


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