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Fiscal announcements and real exchange rate dynamics

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  • Jyh-Lin Wu

Abstract

This paper examines the dynamic impact of anticipated government spending on real exchange rates in a general-equilibrium framework. I show that an increase in government spending causes persistent movements in real exchange rates, and that the time profile of real exchange rates differs with patterns of government spending. Hence, one of the explanations for the misalignment and excess volatility of real exchange rates during the flexible exchange rate system may be volatile changes in government spending. Copyright Kluwer Academic Publishers 1994

Suggested Citation

  • Jyh-Lin Wu, 1994. "Fiscal announcements and real exchange rate dynamics," Open Economies Review, Springer, vol. 5(2), pages 177-190, March.
    • Handle: RePEc:kap:openec:v:5:y:1994:i:2:p:177-190
    DOI: 10.1007/BF01000486
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    References listed on IDEAS

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