Export Currency Pricing and Fiscal Multipliers

Chak Hung Jack Cheng ()

Global Economic Review, 2017, vol. 46, issue 2, 81-100

Abstract: This paper develops a small open economy dynamic stochastic general equilibrium model to study the implications of the use of foreign currency in export pricing for fiscal policy in East Asian economies. The result shows that external currency pricing amplifies the effect of an exogenous government spending shock on output. The impact and cumulative multipliers are larger under external currency pricing. However, the result depends on the government policy regime. When the government allows for a systematic response of government spending to public debt, the multipliers in the medium-term are smaller under external currency pricing.

Date: 2017
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DOI: 10.1080/1226508X.2017.1278713

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