Small eurozone countries can use government spending to combat imbalances

ljublana
Ljubljana, Slovenia

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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