Fiscal shocks and the exchange rate
Giorgio Di Giorgio (),
Salvatore Nisticò () and
Guido Traficante ()
No 5/14, Working Papers from Sapienza University of Rome, DISS
This paper studies how the interaction between the monetary policy regime and the degree of home bias in public consumption affects the exchange-rate response to fiscal shocks in dynamic open-economy models. Our analysis compares the classic Redux model of Obstfeld and Rogoff (1995) and a modern New Keynesian DSGE two-country model, and highlights the substantially different transmission mechanism between the two.
Keywords: Redux Model; Exchange Rate; Fiscal Shocks; Endogenous Monetary and Fiscal Policy. (search for similar items in EconPapers)
JEL-codes: E52 E62 F41 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-opm
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Working Paper: Fiscal shocks and the exchange rate (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:saq:wpaper:5/14
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