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Exchange rate pass-through and fiscal multipliers

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  • Cheng Chak Hung Jack

    (Economics and Finance, Murray State University, 307K Business Building, Murray, Ky 42071, USA)

Abstract

This paper develops a small open economy model with nominal rigidities and search-matching frictions to study the implications of the degree of exchange rate pass-through for fiscal multipliers. I allow for delayed pass-through to both imported consumption goods prices and imported intermediate goods prices. The result shows that incomplete exchange rate pass-through to imported goods prices dampens the fiscal impact on output and unemployment. However, incomplete pass-through to imported input prices has little effect on the output and unemployment multipliers.

Suggested Citation

  • Cheng Chak Hung Jack, 2013. "Exchange rate pass-through and fiscal multipliers," The B.E. Journal of Macroeconomics, De Gruyter, vol. 13(1), pages 1-33, September.
    • Handle: RePEc:bpj:bejmac:v:13:y:2013:i:1:p:33:n:1
    DOI: 10.1515/bejm-2012-0014
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    References listed on IDEAS

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