interest parity condition. It captures the fact that the sharp increase in nominal exchange rate volatility after the … abandonment of the Bretton Woods (BW) system was accompanied by a commensurate rise in real exchange rate volatility, but had no … pronounced effect on the volatility of U.S. and European output. This holds irrespective of whether flexible and sticky prices …

The aim of this paper is twofold. First, for West Germany, France, Italy and US, we econometrically select within a ….1 percent quarterly on average at most to a 1 percentage change in the expenditure or revenue ratio). In Italy, the US and … France, the strongest effect on output is produced by shocks on government expenditure on wages and transfers …