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Real Exchange Rate Effects of Fiscal Policy

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Author Info
Jeffrey Sachs
Charles Wyplosz

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Abstract

This paper develops a framework for analyzing the effects of fiscal policy on the real exchange rate. The short-run impact of various types of fiscal measures are considered as well as the dynamics of adjustment to long-run steady states. The analysis and related simulations suggest that the effect of fiscal policy changes on the real exchange rate can vary widely and will depend closely on a number of structural features, including the degree of asset substitutability,the composition of government spending, and the initial size of the public debt and net external position.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1255.

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Date of creation: Jan 1984
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Handle: RePEc:nbr:nberwo:1255

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. William H. Branson & Willem H. Buiter, 1983. "Monetary and Fiscal Policy with Flexible Exchange Rates," NBER Working Papers 0901, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Turnovsky, Stephen J., 1976. "The dynamics of fiscal policy in an open economy," Journal of International Economics, Elsevier, vol. 6(2), pages 115-142, May. [Downloadable!] (restricted)
  3. Kouri, Pentti J K, 1976. " The Exchange Rate and the Balance of Payments in the Short Run and in the Long Run: A Monetary Approach," Scandinavian Journal of Economics, Blackwell Publishing, vol. 78(2), pages 280-304.
  4. Branson, William H, 1976. "The Dual Roles of the Government Budget and the Balance of Payments in the Movement from Short-Run to Long-Run Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 345-67, August. [Downloadable!] (restricted)
  5. Christ, Carl F, 1979. "On Fiscal and Monetary Policies and the Government Budget Restraint," American Economic Review, American Economic Association, vol. 69(4), pages 526-38, September. [Downloadable!] (restricted)
  6. Hodrick, Robert J., 1980. "Dynamic effects of government policies in an open economy," Journal of Monetary Economics, Elsevier, vol. 6(2), pages 213-239, April. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stephen J. Turnovsky, 1987. "Short-Term and Long-Term Interest Rates in a Monetary Model of a Small Open Economy," NBER Working Papers 1716, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Richard Cantor & Robert Driskill, 1996. "Can a fiscal contraction strengthen a currency?: Some doubts about conventional Mundell-Fleming results," Research Paper 9629, Federal Reserve Bank of New York. [Downloadable!]
  3. Barry Eichengreen, 1991. "International Monetary Instability Between the Wars: Structural Flaws or Misguided Policies?," NBER Working Papers 3124, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Antoine Bouveret & Bruno Ducoudré, 2007. "On the contingency of equilibrium exchange rates with time- consistent economic policies," Documents de Travail de l'OFCE 2007-08, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
  5. Jeffrey Sachs & Warwick J. McKibbin, 1985. "Macroeconomic Policies in the OECD and LDC External Adjustmemt," NBER Working Papers 1534, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Michael Hutchison & Charles Pigott, 1984. "Budget deficits, exchange rates and the current account: theory and U. S. evidence," Economic Review, Federal Reserve Bank of San Francisco, issue Fall, pages 5-25. [Downloadable!]
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