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Fiscal shocks and real exchange rate dynamics: Some evidence for Latin America

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  • Caporale, Guglielmo Maria
  • Ciferri, Davide
  • Girardi, Alessandro

Abstract

This paper analyses the effects of fiscal shocks in selected Latin American countries using a two-country model for output, labour input, government spending and relative prices. Dynamic simulation techniques are then applied, in particular to shed light on the possible effects of fiscal imbalances on the real exchange rate. Using quarterly data over the period 1980-2006, we find that in a majority of cases fiscal shocks are the main driving force of real exchange rate fluctuations.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 30 (2011)
Issue (Month): 5 (September)
Pages: 709-723

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Handle: RePEc:eee:jimfin:v:30:y:2011:i:5:p:709-723

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Web page: http://www.elsevier.com/locate/inca/30443

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Keywords: Fiscal shocks Real exchange rate Latin American countries;

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Cited by:
  1. Guglielmo Maria Caporale & Alessandro Girardi, 2012. "Business Cycles, International Trade and Capital Flows: Evidence from Latin America," CESifo Working Paper Series 4006, CESifo Group Munich.
  2. Santanu Chatterjee & Azer Mursagulov, 2012. "Fiscal Policy and the Real Exchange Rate," IMF Working Papers 12/52, International Monetary Fund.

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