Joint Macro Research Seminar - Johannes Pfeifer (Universität der Bundeswehr München)

Mr. Keynes meets the Classics: Government Spending and the Real Exchange Rate

Abstract

In economies with fixed exchange rates, the adjustment to government spending shocks is asymmetric. A fiscal expansion appreciates the real exchange rate but does not stimulate output. A fiscal contraction does not alter the exchange rate, but lowers output. We develop these insights in a two-sector model of a small

open economy with downward nominal wage rigidity. We establish new empirical evidence that supports the predictions of the model along several dimensions: not only does the exchange rate regime shape the fiscal transmission mechanism as predicted by the model—in doing so it also interacts with economic slack and inflation

Peter Claeys (VUB), Pierrick Clerc (ULiège), Ferre De Graeve (KU Leuven), Romain Houssa (UNamur), Robert Kollmann (ULB), Yasin Kursat Önder (UGent), Luca Pensieroso (UCLouvain), Roland Winkler (UAntwerpen) and Raf Wouters (NBB).

 

Please reply by email to nbbmacro.seminar@nbb.be if you wish to participate to this seminar and/or if you want to have an appointment with the speaker.

Please indicate if you will be physically present or if you will follow the seminar online; due to the current COVID-19 measures, the available places are limited to 8.

Contact : Romain Houssa - romain.houssa@unamur.be
Télecharger : vCal