Fiscal policy within common currency areas

Article Abstract:

A study was conducted to examine the relationships between fiscal policy and currency unions. The study focuses on spillover effects, budget discipline and deficit incentives. Results show that currency unions should not neglect the impact of fiscal policies on the exchange rate mechanism. In addition, mechanisms for directing fiscal transfers and fiscal policy coordination are vital to establish policy discipline and minimize undesirable regional effects.

Research, Fiscal policy, Monetary unions

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The purchasing power parity debate

Article Abstract:

Purchasing power parity (PPP), a disarmingly simple theory, holds that the nominal exchange rate between two currencies should be equal to the ratio of aggregate price levels between the two currencies. Theoretical works suggested that the PPP theory of exchange rates should be linked to relative changes in price levels with deviations that might be only minimal or momentary while the empirical work could find only the flimsiest evidence in support of PPP.

Forecasts, trends, outlooks, Models, Forecasts and trends, Foreign exchange, Foreign exchange rates, Market trend/market analysis, Purchasing power

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Savings-investment correlations: transitory versus permanent

Article Abstract:

Research on regression estimations of investment shares on savings shares has yielded assumptions on domestic and foreign fiscal activity. Transitory savings movements are likely to cause investment to remain localized, due to potential difficulties with international transactions, evaluating foreign investment opportunities and mitigating exchange controls. Savings increases perceived to be permanent are likely to shift investment abroad.

International aspects, Investments, Savings

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