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Journal of Economic Integration 2006 March;21(1) :147-156.
DOI: https://doi.org/10.11130/jei.2006.21.1.147
Application of the IS-MP-IA Model and the Taylor Rule to Croatia: Policy Implications for Economic Integration
Yu Hsing 
Southeastern Louisiana University
Copyright ©2006 Journal of Economic Integration
ABSTRACT

Applying the IS-MP-IA model and the Taylor rule, this study finds that a lower expected inflation rate, real appreciation, a lower federal funds rate, and more world output would help increase the Croatian output. The insignificance of government deficit spending suggests that the Ricardian-equivalence hypothesis may be applicable to Croatia. The conventional wisdom to pursue currency devaluation to stimulate the economy may not work for Croatia.

JEL classifications: E52, E62, F41

Keywords: IS-MP-IA | Taylor rule | deficit spending | devaluation | world interest rates
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