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Fiscal shocks and the exchange rate

Listed author(s):
  • Giorgio Di Giorgio

    ()

    (LUISS Guido Carli, Department of Economics and Finance, Rome (Italy))

  • Salvatore Nisticò

    ()

    (Dipartimento di Scienze Sociali ed Economiche, Sapienza University of Rome)

  • Guido Traficante

    ()

    (European University of Rome)

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 dynamic open-economy models. Our analysis compares the classic Redux model of Obstfeld and Rogoff (1995) and a modern New Keynesian DSGE two-country model, and highlights the substantially different transmission mechanism between the two.

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File URL: http://www.diss.uniroma1.it/sites/default/files/allegati/Nisticoetal_wp5_2014.pdf
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Paper provided by Sapienza University of Rome, DISS in its series Working Papers with number 5/14.

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Date of creation: Jul 2014
Handle: RePEc:saq:wpaper:5/14
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  1. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 624-660, June.
  2. Giorgio Di Giorgio & Salvatore Nistico, 2007. "Monetary Policy and Stock Prices in an Open Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(8), pages 1947-1985, December.
  3. Thomas Lubik & Frank Schorfheide, 2006. "A Bayesian Look at the New Open Economy Macroeconomics," NBER Chapters,in: NBER Macroeconomics Annual 2005, Volume 20, pages 313-382 National Bureau of Economic Research, Inc.
  4. Giancarlo Corsetti & Paolo Pesenti, 2001. "Welfare and Macroeconomic Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 421-445.
  5. Di Giorgio, Giorgio & Nisticò, Salvatore, 2013. "Productivity shocks, stabilization policies and the dynamics of net foreign assets," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 210-230.
  6. Ganelli, Giovanni, 2005. "Home Bias In Government Spending And Quasi Neutrality Of Fiscal Shocks," Macroeconomic Dynamics, Cambridge University Press, vol. 9(02), pages 288-294, April.
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