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Abstract:
The purpose of this paper is to describe and to analyze in some detail the U.K. sector of the Federal Reserve's Multicountry Model (MCM). The analysis focuses on the effects of shifts in U.K. monetary and fiscal policies at three levels: 1) within the unlinked U.K. sector, 2) within the linked MCM framework, and 3) within the linked MCM under the assumption that U.K. policy shifts are coordinated with those in other countries. In comparing the unlinked MCM U.K. sector with other U.K. models such as the LBS and National Institute it is found that all the models have similar government expenditure multipliers but the components of GNP respond quite differently. The contrast between linked and unlinked simulation illustrates the importance of international feedback effects.
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