Arbeitspapier
Government Spending Shocks, Sovereign Risk and the Exchange Rate Regime
Conventional wisdom teaches that the output response upon a fiscal expansion is higher under fixed than floating exchange rates for a small open economy. We analyse the effects of fiscal expansions using a New Keynesian model and find that this result reverses in times of sovereign default risk. Under a float, a fiscal expansion is followed by an exchange rate depreciation, which stimulates exports; under a peg, only the adverse effects of sovereign risk on private credit conditions and consumption remain. When these adverse effects are large, we show that a transient fiscal contraction may bring about positive output responses, yet only in the short run.
- Sprache
-
Englisch
- Erschienen in
-
Series: Tinbergen Institute Discussion Paper ; No. 13-212/VI
- Klassifikation
-
Wirtschaft
Business Fluctuations; Cycles
Monetary Policy
Fiscal Policy
- Thema
-
Fiscal policy
government spending
exchange rate regime
sovereign risk
New Keynesian model
expansionary fiscal consolidation
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Bonam, Dennis
Lukkezen, Jasper
- Ereignis
-
Veröffentlichung
- (wer)
-
Tinbergen Institute
- (wo)
-
Amsterdam and Rotterdam
- (wann)
-
2013
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:44 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Bonam, Dennis
- Lukkezen, Jasper
- Tinbergen Institute
Entstanden
- 2013
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