Discussion of the longer-run impact of current account/ Econometrics
The chapter’s discussion of “Inflation Bias and Other Problems of Policy Formulation” suggests (page 441, paragraph 4) that there may not really be any such thing as a permanent fiscal expansion. What do you think? How would these considerations affect the exchange rate and output effects of fiscal policy? Do you see any parallels with this chapter’s discussion of the longer-run impact of current account imbalances?
