IDEAS home Printed from https://ideas.repec.org/a/ris/integr/0528.html
   My bibliography  Save this article

Exchange-Rate Regimes and the Effectiveness of Fiscal Policy

Author

Listed:
  • Karras, Georgios

    () (University of Illinois)

Abstract

How does the potency of fiscal policy depend on a country’s exchange-rate regime? The Mundell-Fleming theoretical model predicts that fiscal policy can affect output under both fixed and flexible exchange rates, but that the effect is larger when the exchange rate is fixed. Using a panel data set of 61 countries for the 1951-2007 period, the paper shows that fiscal policy is indeed more potent under fixed exchange rates than under flexible, and that the difference is substantial: the estimated models imply that maintaining a fixed exchange rate raises the long-run fiscal multiplier by roughly a third.

Suggested Citation

  • Karras, Georgios, 2011. "Exchange-Rate Regimes and the Effectiveness of Fiscal Policy," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 29-44.
  • Handle: RePEc:ris:integr:0528
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    as
    1. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, January.
    2. Lionel Fontagné & Thierry Mayer & Soledad Zignago, 2005. "Trade in the Triad: how easy is the access to large markets?," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1401-1430, November.
    3. Fontagné, Lionel & Mitaritonna, Cristina, 2013. "Assessing barriers to trade in the distribution and telecom sectors in emerging countries," World Trade Review, Cambridge University Press, vol. 12(01), pages 57-78, January.
    4. Yvan Decreux & Hugo Valin, 2007. "MIRAGE, Updated Version of the Model for Trade Policy Analysis: Focus on Agriculture and Dynamics," Working Papers 2007-15, CEPII research center.
    5. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
    6. Yvan Decreux & Lionel Fontagné, 2011. "Economic Impact of Potential Outcome of the DDA," Working Papers 2011-23, CEPII research center.
    7. Christophe Blot & Marion Cochard, 2008. "L'énigme des exportations revisitée. Que faut-il retenir des données de panel ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(3), pages 67-100.
    8. Lionel Fontagné & Amélie Guillin & Cristina Mitaritonna, 2011. "Estimations of Tariff Equivalents for the Services Sectors," Working Papers 2011-24, CEPII research center.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Georgios Karras, 2012. "Trade openness and the effectiveness of fiscal policy: some empirical evidence," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 59(3), pages 303-313, September.

    More about this item

    Keywords

    Fiscal Policy; Fixed or Flexible Exchange Rates;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:integr:0528. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jong-Eun Lee). General contact details of provider: http://edirc.repec.org/data/desejkr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.