Fiscal policy and the real exchange rate

Santanu Chatterjee and Azer Mursagulov

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 under

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Year of publication:	2012
Authors:	Chatterjee, Santanu ; Mursagulov, Azer
Publisher:	Washington, DC : Internat. Monetary Fund
Subject:	Finanzpolitik \| Fiscal policy \| Infrastrukturinvestition \| Infrastructure investment \| Öffentliche Ausgaben \| Public expenditure \| Kaufkraftparität \| Purchasing power parity

Extent:	Online-Ressource (PDF-Datei: 39 S., 2,142 KB) graph. Darst.
Series:	IMF working papers. - Washington, DC : IMF, ZDB-ID 2108494-4. - Vol. 12/52 IMF Working Papers
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Arbeitspapier ; Working Paper ; Graue Literatur ; Non-commercial literature
Language:	English
Notes:	"February 2012 Includes bibliographical references Systemvoraussetzungen: Acrobat Reader Cover; Contents; 1. Introduction; 2. The Analytical Framework; 2.1. Resource allocation in the private sector; 2.2. The public sector; 2.3. Macroeconomic equilibrium; 2.4. Current account dynamics; 3. Numerical Analysis; 3.1. The benchmark equilibrium; 3.2. Fiscal policy shocks; 3.3. Exchange rate dynamics: sensitivity to financing policies; 3.4. The persistence of the real exchange rate; 3.5. The short-run correlation between government spending and private consumption; 4. Sensitivity Analysis; 4.1. Sectoral output elasticity of public capital; 4.2. Elasticity of substitution in production 4.3. Intersectoral adjustment costs5. Conclusions; Tables; 1. Benchmark equilibrium; 2. Government spending shocks: Long-run effects; 3. Government spending and the real exchange rate; 4. Government spending and short-run consumption; Figures; 1. Government spending shocks; 2. Government spending and the real exchange rate: sensitivity to financing policies; 3. Government spending, the persistence of the real exchange rate, and the time horizon; 4. Government spending and consumption: sensitivity to the sectoral elasticity of public capital 5. Government spending and the real exchange rate: sensitivity to the sectoral elasticity of public capital6. Government spending and the real exchange rate: sensitivity to the elasticity of substitution in production; 7. Government spending and the real exchange rate: sensitivity to intersectoral adjustment costs; References Electronic reproduction; Available via World Wide Web
ISBN:	978-1-4639-3713-3 ; 978-1-4639-4564-0 ; 978-1-4639-3713-3
Source:	ECONIS - Online Catalogue of the ZBW

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