Real Exchange Rate Effects of Fiscal Policy

Jeffrey Sachs and Charles Wyplosz

No 1255, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops a framework for analyzing the effects of fiscal policy on the real exchange rate. The short-run impact of various types of fiscal measures are considered as well as the dynamics of adjustment to long-run steady states. The analysis and related simulations suggest that the effect of fiscal policy changes on the real exchange rate can vary widely and will depend closely on a number of structural features, including the degree of asset substitutability,the composition of government spending, and the initial size of the public debt and net external position.

Date: 1984-01
Note: ITI IFM
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