Fiscal Policy and Exchange Rates
AbstractThis paper examines the dynamics of the nominal exchange rate and fiscal deficits in a continuous time optimizing general equilibrium model with finite horizon. It is shown that alternative financing modes of budget deficits imply different patterns of adjustment along the transitional path towards the steady state equilibrium. In particular, the respect of public solvency without money financing is not suffcient to avoid the depreciation of the exchange rate in the long-run after a fiscal expansion.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Economics.
Volume (Year): 89 (2006)
Issue (Month): 2 (November)
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Web page: http://www.springerlink.com/link.asp?id=108909
exchange rates; fiscal deficits; current account dynamics; F31; F32; E62;
Other versions of this item:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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