M. Mandel et V. Tomsik, Monetary and fiscal policy mix in the Czech Republic: Empirical verification of the principle of effective market classification, POLIT EKON, 49(2), 2001, pp. 163-175
Monetary and fiscal policy should be paired with the economic objectives on
which they have the most influence. The authors have transformed this trad
itional Mundell's principle of effective market classification into the Con
ditions of the Czech economy - a small open economy with controlled floatin
g exchange rate system and high inflow of foreign direct investment. An emp
irical verification confirmed the requirement of the modification of this p
rinciple in the CR. An application of the modified model in the CR resulted
in the following recommendation for the Czech economic policy mix: monetar
y policy should control the external balance and fiscal policy the internal
balance.