Fiscal policies, current accounts and real exchange rates: In search of a logic of international policy coordination

Conclusion

In this lecture I have focussed on the effects of fiscal policies on current accounts and real exchange rates. I have been concerned with real exchange rates, not nominal rates, and with the policy mix - affecting countries’ desires to borrow and lend and thus run current account imbalances - and not with the consequences of variations in the overall level of activity. Perhaps, like others writing on these topics, I have been a general fighting the last war, since the era of divergent fiscal policies might be gradually drawing to a close, and who knows what will be the new sources of disturbances. But there are basic analytical issues here, and these do need to be sorted out and will continue to be relevant.