PPGC66H3 Lecture Notes - Lecture 3: United States Treasury Security, Market Failure, Government Spending
Document Summary
The international monetary regime bretton woods standard 1944- Fixed exchange rates: allows for flexibility in monetary policy as currency stability is no logner achieved by high interest rates, allows for expansionary fiscal policy because government spending does not impact currency stability. = growth centred model of economic development through expansionary fiscal policy and accommodative monetary policy. Concerns for economic growth = tend toward lower rates. Money comes and goes based on level of interest rate offered. = tend toward higher rates (more restrictive monetary policy) = tend toward fiscal neutrality; limited government spending. Fiscal policy is concerned with growth and capital flows. Bretton woods made it possible for us not to be concerned with capital. One of the limits of capital growth is its ability to go anywhere it wants to: the international monetary regime of the dollar standard 1974 - present.
