Fiscal Policy And The Real Exchange Rate
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Fiscal Policy And The Real Exchange Rate
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Author : Mr.Santanu Chatterjee
language : en
Publisher: International Monetary Fund
Release Date : 2012-02-01
Fiscal Policy And The Real Exchange Rate written by Mr.Santanu Chatterjee and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-02-01 with Business & Economics categories.
Government spending on infrastructure has recently increased sharply in many emerging-market economies. This paper examines the mechanism through which public infrastructure spending affects the dynamics of the real exchange rate. Using a two-sector dependent open economy model with intersectoral adjustment costs, we show that government spending generates a non-monotonic U-shaped adjustment path for the real exchange rate with sharp intertemporal trade-offs. The effect of government spending on the real exchange rate depends critically on (i) the composition of public spending, (ii) the underlying financing policy, (iii) the intensity of private capital in production, and (iv) the relative productivity of public infrastructure. In deriving these results, the model also identifies conditions under which the predictions of the neoclassical open economy model can be reconciled with empirical regularities, namely the intertemporal relationship between government spending, private consumption, and the real exchange rate.
Fiscal Policy And The Real Exchange Rate
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Author : Santanu Chatterjee
language : en
Publisher:
Release Date : 2014
Fiscal Policy And The Real Exchange Rate written by Santanu Chatterjee and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
This paper examines the mechanisms through which government spending affects the dynamics of the real exchange rate. Using a two-sector dependent open economy model with intersectoral mobility costs for private capital, we show that public investment generates a (i) non-monotonic U-shaped adjustment path for the real exchange rate with sharp intertemporal trade-offs, and (ii) a crowding-in of private consumption, consistent with stylized facts. The effects of public consumption, however, are in sharp contrast to those of public investment. The effect of government spending on the real exchange rate depends critically on (i) the sectoral composition of public spending, (ii) the underlying financing policy, (iii) the sectoral intensity of private capital in production, (iv) the relative sectoral productivity of public infrastructure, (v) the elasticity of substitution in production, and (vi) intersectoral mobility costs for capital. In deriving these results, we identify conditions under which the predictions of the neoclassical open economy model can be reconciled with empirical regularities. Our results underscore the importance of decoupling the effects of government investment from government consumption in understanding the relationship between fiscal policy and the real exchange rate.
Fiscal Imbalances Capital Inflows And The Real Exchange Rate
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Author : E. Murat Ucer
language : en
Publisher: International Monetary Fund
Release Date : 1997-01-01
Fiscal Imbalances Capital Inflows And The Real Exchange Rate written by E. Murat Ucer and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997-01-01 with Business & Economics categories.
This paper examines the links between fiscal policy, capital inflows, and the real exchange rate in Turkey since the late 1980s. After an overview of recent macroeconomic developments in Turkey, a vector autoregression model is estimated linking government spending, interest rate differentials, capital inflows, and the temporary component of the real exchange rate. Positive shocks to government spending and capital inflows lead to an appreciation of the temporary component of the real exchange rate, whereas positive shocks to the uncovered interest rate differential lead to a capital inflow and an appreciation of the temporary component of the real exchange rate. The findings highlight the role of fiscal adjustment in restoring macroeconomic stability.
Targeting The Real Exchange Rate
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Author : Mr.Guillermo Calvo
language : en
Publisher: International Monetary Fund
Release Date : 1994-02-01
Targeting The Real Exchange Rate written by Mr.Guillermo Calvo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994-02-01 with Business & Economics categories.
This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model’s prediction that undervalued real exchange rates are associated with higher inflation.
Fiscal Policy The Real Exchange Rate And Commodity Prices
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Author : Ms.Carmen Reinhart
language : en
Publisher: International Monetary Fund
Release Date : 1990-10-01
Fiscal Policy The Real Exchange Rate And Commodity Prices written by Ms.Carmen Reinhart and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1990-10-01 with Business & Economics categories.
The role of the international commodity market in transmitting disturbances is considered in a model that incorporates commodities as an input in production. The analysis employs a three-country framework: a liquidity-constrained commodity supplier and two industrial countries that import the commodity, export differentiated manufactured goods and hold the outstanding debt of the commodity exporter. In this setting the impact of changes in fiscal policy, commodity supplies, and the real interest rate are assessed. Particular attention is paid to the responses of the real exchange rate, commodity prices, and the international distribution of debt to the various shocks.
Real Exchange Rate Appreciation In Emerging Markets
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Author : Marialuz Moreno Badia
language : en
Publisher: International Monetary Fund
Release Date : 2014-01-10
Real Exchange Rate Appreciation In Emerging Markets written by Marialuz Moreno Badia and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-01-10 with Business & Economics categories.
A number of emerging markets have experienced substantial real exchange rate appreciation in recent years, generating concerns about competitiveness and prompting policymakers to respond with a combination of mitigating policies. This paper shows that fiscal policy can play a role in alleviating these pressures. Using a sample of 28 emerging market economies over 1983-2011, we estimate a dynamic model of the real exchange rate and find that a permanent fiscal adjustment may reduce appreciation pressures over the long term. Furthermore, the composition of public spending matters, with reductions in current spending playing a key role. To illustrate the importance of these findings, the paper focuses on the case of Brazil. Our results suggest that maintaining fiscal discipline while increasing public investment in Brazil is likely to ease real appreciation pressures, highlighting the importance of tackling long-standing budget rigidities.
Simulating The Effects Of Some Simple Coordinated Versus Uncoordinated Policy Rules
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 1989-01-01
Simulating The Effects Of Some Simple Coordinated Versus Uncoordinated Policy Rules written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 1989-01-01 with Business & Economics categories.
Effects of different policy rules are simulated: uncoordinated targeting of the money supply or nominal income, use of monetary policy to achieve coordinated targets for nominal or real exchange rates, and the use of monetary and fiscal policies to hit targets for internal and external balance. The following conclusions emerge: rules which performed best for some shocks performed poorly for others; monetary policy was ineffective in limiting movements in real exchange rates; unconstrained use of fiscal policy was quite powerful in influencing real variables; and dynamic instability was a potentially serious problem. Robustness to different specifications and to constraints on instruments remains to be examined.
Macroeconomic Policy
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Author : Martin Weale
language : en
Publisher: Routledge
Release Date : 2015-10-05
Macroeconomic Policy written by Martin Weale and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-10-05 with Business & Economics categories.
This analysis of macroeconomic policy, originally published in 1989, argues that key government objectives, such as reduced inflation, decreased unemployment and an adequate level of national saving can be achieved only by employing both monetary and fiscal policies, in conjunction with supply-side policies expressly designed to improve the workings of the labour market. Part 1 is a comparative analysis showing the effects of monetary and fiscal policy on the economy. Real-wage rigidity in the labour market is shown to have important consequences for the working of both types of policy, because it conditions the economy’s response to tax changes. Part 2 presents an econometric model which combines consistent stock-flow accounts with a full range of expectational effects. Part 3 presents an innovative technique for solving rational expectations models with the need for arbitary terminal conditions.
Economic Policy Exchange Rates And The International System
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Author : Warner Max Corden
language : en
Publisher: OUP Oxford
Release Date : 1994
Economic Policy Exchange Rates And The International System written by Warner Max Corden and has been published by OUP Oxford this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with Business & Economics categories.
In an outstanding account of exchange rates inthe international monetary system, W. Max Corden considers the essential issues in international macroeconomics.The author takes as his model the macroeconomic situation of a country with an open economy, and explains the effects of domestic fiscal and monetary macroeconomic policy on exchange rates. He clearly analyses the choices faced by governments attempting to manage both the domestic inflation rateand the external exchange rate and current account balance. Professor Corden then discusses the European Exchange Rate mechanism, and provides a sceptical analysis of the possibilities for monetary union in Europe, and for international policy coordination in general. He gives equal weight todiscussion of the present US-centred international monetary system outside the ERM, and combines theoretical models with an account of the actual determination of floating exchange rates. Although the book itself is orientated towards monetary rather than trade issues, the author discusses twotopical issues: the role of protectionist policies, and the idea of competitiveness. Finally, he looks at the future of the international monetary system and the series of current reform proposals.Students will find this book useful because the author covers essential issues lucidly and authoritatively. The exposition is entirely non-mathematical. Postgraduate students and academics will be interested since Corden is a distinguished writer on international trade and policy, and hisarguments are powerfully presented.New to this edition:This is a revised and expanded edition of a previous book by Corden, Inflation, Exchange Rates and the World Economy, the third edition of which was published in 1985. In this new book, Professor Corden has fully rewritten the text, but retains the discursive, informal, reader-friendly style ofthe earlier editions. In this new edition, Professor Corden has included two new chapters which extend the treatment of macroeconomic policy, separating it into its fiscal and monetary branches. He also includes a new chapter on the role of the current account balance in determining macroeconomicpolicy. The author has brought his account of the present international monetary context up to date - characterised as the non-system - and has included a new analysis of European monetary issues, incorporating a review of the progress of the EMS towards full monetary union. The book also containsa provocative discussion of two highly topical issues: trade protection, and competitiveness, including both new theoretical analysis and such events as the recent GATT agreement.
Fiscal Policy Intercountry Adjustment And The Real Exchange Rate Within Europe
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Author : Christopher Allsopp
language : en
Publisher:
Release Date : 2008
Fiscal Policy Intercountry Adjustment And The Real Exchange Rate Within Europe written by Christopher Allsopp and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with Economic and Monetary Union categories.
The paper argues that an improved fiscal policy process might result in improved macroeconomic performance within Europe. Within EMU, a country may have difficulty ensuring stability in the face of asymmetric shocks; the response may be unstable, or, even if not, the real exchange rate might overshoot. In this context, the rules of the SGP may interfere with the control of inflation control, with the short-run stabilisation of demand, and also with the longer term adjustment of intra-European real exchange rates. We recommend using fiscal policy to stabilise inflation and also to target the real exchange rate rather than deficits or debt. Such a policy would require a more active use of fiscal policy.