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Fiscal Shocks and the Exchange Rate in a Generalized Redux Model


  • Giorgio Di Giorgio
  • Salvatore Nisticò
  • Guido Traficante


type="main" xml:lang="en"> This paper studies how the interaction between the monetary policy regime and the degree of home bias in public consumption affects the exchange-rate response to fiscal shocks in a generalized version of the Redux model of Obstfeld and Rogoff ( ). We show that the joint presence of home bias in public consumption and endogenous monetary policy overturns the result of the Redux model implying an exchange-rate appreciation in response to an expansionary fiscal shock.

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  • Giorgio Di Giorgio & Salvatore Nisticò & Guido Traficante, 2015. "Fiscal Shocks and the Exchange Rate in a Generalized Redux Model," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 44(3), pages 419-436, November.
  • Handle: RePEc:bla:ecnote:v:44:y:2015:i:3:p:419-436

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    Cited by:

    1. Giorgio Di Giorgio & Salvatore Nisticò & Guido Traficante, 2015. "Government spending and the exchange rate," Working Papers 4/15, Sapienza University of Rome, DISS.
    2. Giorgio Di Giorgio & Guido Traficante, 2018. "Fiscal Shocks and Helicopter Money in Open Economy," Working Papers 1/18, Sapienza University of Rome, DISS.

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