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Fiscal Shocks and The Real Exchange Rate

  • Agustín S. Bénétrix and Philip R. Lane

We estimate the impact of shocks to government spending on the real exchange rate for a panel of EMU member countries. Our key finding is that the impact differs across different types of government spending, with shocks to public investment generating a larger and more persistent impact on the real exchange rate than shocks to government consumption. Within the latter category, we also show that the impact of shocks to the wage component of government consumption is larger than for shocks to the non-wage component.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp286.

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Date of creation: 03 Mar 2009
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Handle: RePEc:iis:dispap:iiisdp286
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  23. Holm-Hadulla, Fédéric & Kamath, Kishore & Lamo, Ana & Pérez, Javier J. & Schuknecht, Ludger, 2010. "Public wages in the euro area - towards securing stability and competitiveness," Occasional Paper Series 112, European Central Bank.
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