Small eurozone countries can use government spending to combat imbalances
ECB-published working paper examines small open economies in a monetary union
Government investment can be used to counteract external imbalances in a small open economy in a monetary union, according to a new working paper by economists from the central banks of Slovenia and Ireland, and one from the ECB.
The effects of government spending in a small open economy within a monetary union, by Daragh Clancy, Pascal Jacquinot and Matija Lozej, points out that small open economies within a monetary union have a limited range of stabilisation tools, as area-wide nominal
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