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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
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    References listed on IDEAS

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    1. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1329-1368.
    2. Jörn Kleinert, 2003. "Growing Trade in Intermediate Goods: Outsourcing, Global Sourcing, or Increasing Importance of MNE Networks?," Review of International Economics, Wiley Blackwell, vol. 11(3), pages 464-482, August.
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