The Effects of Government Spending on Real Exchange Rates: Evidence from Military Spending Panel Data
Thuy Lan Nguyen and
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Wataru Miyamoto: Bank of Canada
No 117, 2017 Meeting Papers from Society for Economic Dynamics
Using panel data on military spending for 125 countries, we document new facts about the effects of changes in government purchases on the real exchange rate, consumption, and current accounts in both advanced and developing countries. While an increase in government purchases causes real exchange rates to appreciate and increases consumption significantly in developing countries, it causes real exchange rates to depreciate and decreases consumption in advanced countries. The current account deteriorates in both groups of countries. These findings are not consistent with standard international business-cycle models. We propose potential sources of the differences between advanced and developing countries in the responses to spending shocks.
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Journal Article: The effects of government spending on real exchange rates: Evidence from military spending panel data (2019)
Working Paper: The effects of government spending on real exchange rates: evidence from military spending panel data (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:117
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