Crowding-Out in Einer Kleinen Offenen Volkswirtschaft (Crowding-out in a Small Open Economy)

Abstract:     
In a small open economy, the crowding-out effects on private demand of increasing public expenditures are different under fixed and flexible exchange rates. Differences also emerge under perfect and imperfect capital mobility as well as under full and imperfect capacity utilization. After discussing the various channels of crowding out, the case of Austria is empirically examined. Although during the 1970s the rising public debt pushed up the level of interest rates, crowding-out effects vanished towards the early 1980s because of abating capacity strains and a depreciating real effective exchange rate.

Number of Pages in PDF File: 9

Keywords: Crowding out, effective exchange rate, Austria

JEL Classification: E65, H30

Accepted Paper Series