Fiscal Policy and the Theory of International Trade

摘要: This article integrates key aspects of fiscal policy into the theory international trade under classical assumptions in which purchasing power parity holds, is perfectly anticipated, and basic choice affecting individuals, besides holding transactions balances, between present future goods. The analysis conducted assumption three alternative monetary rules accompanying a given policy: (1) fixed exchange rates with passive adjustment; (2) flexible money stocks; (3) active domestic credit policies designed to hold reserves constant. It shown that effect on interest rate determined less by method government spending financed than division among periods. that, certain circumstances, derived paper, country may be able put entire burden, more, rest world. Retaliation, however, could cancel this result; nevertheless, it reflecting economic power, one gain nationalistic even if other retaliated, provided did so an “optimum” way no intention damage aggressive party. world monolithic then dropped, divided partner rival countries, leading important real-world result some countries are always helped country’s policies, whereas hurt. In final section possibility cycles age-profile population at home abroad taken account trading patterns noted.