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| Topic: |
Business
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| Number of pages / Number of words: |
4 / 882 |
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The result of an increase in money supply is illustrated by point B, while a temporary fiscal expansion would result in point C. The DD-AA model assumes that a real appreciation in domestic currency immediately improves the CA, while a real appreciation causes the CA to worsen. A more realistic approach to this is illustrated via a J-curve...
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A more realistic approach to this is illustrated via a J-curve. The J-curve is constructed under the assumption that a country's current account worsens immediately after a real currency depreciation, and that there is some lag before it improves months later. The following illustration shows a more realistic response to the current account...
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