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SCOPUS 학술저널

Price Controls in a Simple Competitive Monetary Model of a Small Open Economy

Price Controls in a Simple Competitive Monetary Model of a Small Open Economy

We construct a simple monetary general equilibrium model of a small open economy to examine the effects of three price intervention policies. We find that, under fixed exchange rates, a small intervention on the producer`s price of the domestically produced non-traded good or a small revaluation of the exchange rate improves current welfare but deteriorates the trade balance. We apply the theory of economic policy to show that, if the government can impose more than one policy instrument, it is possible to improve national welfare without affecting the trade balance.

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