Publisher's Synopsis
Although it is the chief tool for "international policy analysis in an international context", the Mundell-Fleming model has come under some scrutiny as being "obsolete" and weak in microeconomics. The model is used to study monetary and fiscal policy of various exchange rate systems. New Open Economy Macroeconomics attempts to insert market imperfections and "microfoundations" into its framework, as an alternative to Mundell-Fleming. However, this new structure has raised its own doubts about its viability as an alternative to Mundell-Fleming. The empirical tests of New Open Macroeconomic models do not result in predictions that fit with available evidence. This testing, though, is still in its early stages and the new models continue to hold some promise. This book assembles a series of papers that take differing points of view in theoretical analyses of macroeconomic policies in open economies. These observations provide a solid framework for study, examine applications in two-country models and try and unite Mundell-Fleming with New Open Macroeconomics. With economics a constant in the forefront of the news, the studies here offer a glimpse at the cutting edge of fiscal research.
