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================= ECONHIST.MACRO POSTING =================
Forwarded message:
> From econhist.macro@cs.muohio.edu Tue Dec 20 11:00 CST 1994
> Date: Tue, 20 Dec 1994 11:59:06 -0500
> Message-Id: <9412201643.AA15783@malthus.morton.wm.edu>
> Errors-To: ljohnston@cs.muohio.edu
> Reply-To: dhfeld@mail.wm.edu
> Originator: econhist.macro@cs.muohio.edu
> Sender: econhist.macro@cs.muohio.edu
> Precedence: bulk
> From: "David Feldman" <dhfeld@mail.wm.edu>
> To: ljohnston@cs.muohio.edu
> Subject: Samuel Williamson's plea
> X-Listprocessor-Version: 6.0c -- ListProcessor by Anastasios Kotsikonas
> X-Comment: Macroeconomic history
> Content-Type: text
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>
> This message was submitted by "David Feldman" <dhfeld@mail.wm.edu> to list
> econhist.macro@cs.muohio.edu. If you forward it back to the list, it will be
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> ----------------------- Message requiring your approval ----------------------
> Sender: "David Feldman" <dhfeld@mail.wm.edu>
> Subject: Samuel Williamson's plea
>
> I teach open economy macro, so I am most interested in the
> international consequences of domestic fiscal actions. If the tax cuts
> produce a fiscal stimulus that markets expect to be permanent (they exceed
> present and expected future budget cuts) then we should expect a real
> appreciation of the dollar to dissipate much if not all of the stimulative
> effect. The initial rise in aggregate demand will push up the relative
> price of nontradables within the U.S. and reaise U.S. prices for tradables
> relative to foreign tradables (see the Krugman-Obstfeld text, pp. 421-24 and
> 458-60). The unfortunate side consequence of this would be further pressure
> on the current account, more Japan bashing and increased political
> manipulation of anti-dumping and CVD provisions by Congress. In a U.S.
> context, I can't easily use the words rational and fiscal policy in the same
> sentence (except, of course in a narrow and short run political sense).
>
> A second issue concerns fiscal policy coordination between nations (
> a hot topic a few years ago). Coordination may or may not be desirable, but
> it's hardly practical (as this episode illustrates). The U.S. political
> structure makes fiscal policy unwieldy, and constitutional constraints limit
> U.S. participation in any international agreement (see Martin Feldsteins
> discussion in the Spring, 88 JEP).
>
> David H. Feldman
> College of William and Mary
>
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