Abstract:This paper develops a wavelet-based control system model that can be used to simulate fiscal and monetary strategies in an open economy context in the timefrequency domain. As the emphasis on real exchange rate stability is increased, the model simulates the effects on both the aggregate and decomposed trade balance under both constant and depreciating real exchange rate targets, and also the effects on the real GDP expenditure components. This paper adds to recent research in this area by incorporating an ext… Show more
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