Fiscal Policy and the Real Exchange Rate

Released on by Mr.Santanu Chatterjee
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  • Fiscal Policy and the Real Exchange Rate Book Detail

  • Author : Mr.Santanu Chatterjee
  • Release Date : 2012-02-01
  • Publisher : International Monetary Fund
  • Genre : Business & Economics
  • Pages : 40
  • ISBN 13 : 146393713X
  • File Size : 64,64 MB
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Fiscal Policy and the Real Exchange Rate by Mr.Santanu Chatterjee PDF Summary

Book Description: Government spending on infrastructure has recently increased sharply in many emerging-market economies. This paper examines the mechanism through which public infrastructure spending affects the dynamics of the real exchange rate. Using a two-sector dependent open economy model with intersectoral adjustment costs, we show that government spending generates a non-monotonic U-shaped adjustment path for the real exchange rate with sharp intertemporal trade-offs. The effect of government spending on the real exchange rate depends critically on (i) the composition of public spending, (ii) the underlying financing policy, (iii) the intensity of private capital in production, and (iv) the relative productivity of public infrastructure. In deriving these results, the model also identifies conditions under which the predictions of the neoclassical open economy model can be reconciled with empirical regularities, namely the intertemporal relationship between government spending, private consumption, and the real exchange rate.

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Fiscal Policy and the Real Exchange Rate

Fiscal Policy and the Real Exchange Rate

File Size : 65,65 MB
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Government spending on infrastructure has recently increased sharply in many emerging-market economies. This paper examines the mechanism through which public i

Fiscal Policy and the Real Exchange Rate

Fiscal Policy and the Real Exchange Rate

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Total View : 7251 Views
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This paper examines the mechanisms through which government spending affects the dynamics of the real exchange rate. Using a two-sector dependent open economy m