Fiscal Policy and the Real Exchange Rate

Michael Devereux and Douglas Purvis

Working Paper from Economics Department, Queen's University

Abstract: This paper reconsiders some conventional notions about fiscal policy under flexible exchange rates using an extended version of the well-known Dornbusch "overshooting" model. Three widely-held views are challenged: 1) the Mundell-Fleming result that fiscal policy is ineffective under flexible exchange rates; 2) that real shocks (including fiscal policy) do not cause exchange rate overshooting; and 3) that real shocks are not important in explaining high exchange rate variability. In our model, output is affected by fiscal policy in the short and long run.

Pages: 33 pages
Date: 1984
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Fiscal policy and the real exchange rate (1990)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:593

Access Statistics for this paper

More papers in Working Paper from Economics Department, Queen's University Contact information at EDIRC.
Bibliographic data for series maintained by Mark Babcock ().