EconPapers    
Economics at your fingertips  
 

The Importance of Composition of Fiscal Policy: Evidence from Different Exchange Rate Regimes

Philip Lane and Roberto Perotti
Additional contact information
Roberto Perotti: Postal: Department of Economics, Trinity College, Dublin 2, Ireland

CEG Working Papers from Trinity College Dublin, Economics Department

Abstract: We study the macroeconomic effects of fiscal policies in an open economy. We emphasize two transmission mechanisms: the cost channel, by which wage government spending and labor taxes raise the real wage firms must pay, and the exchange rate channel, by which the nominal exchange rate shifts induced by fiscal policy have real effects if (some) prices and wage are sticky. The latter channel implies that changes in wage government spending or in labor taxation should have different effects under flexible than under fixed exchange rates. In a 1964-93 panel of OECD countries we find significant evidence for both channels. Moreover, we find that the real product wage and profitability are more responsive than quantities (employment and output) to fiscal policy innovations.

Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link)
http://www.tcd.ie/Economics/TEP/2001_papers/TEPNo16PL21.pdf (application/pdf)

Related works:
Journal Article: The importance of composition of fiscal policy: evidence from different exchange rate regimes (2003) Downloads
Working Paper: The Importance of Composition of Fiscal Policy: Evidence from Different Exchange Rate Regimes (2001) Downloads
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:tcd:tcdceg:200111

Access Statistics for this paper

More papers in CEG Working Papers from Trinity College Dublin, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Colette Angelov ().

 
Page updated 2019-11-14
Handle: RePEc:tcd:tcdceg:200111