Questioning the puzzle: Fiscal policy, real exchange rate and inflation

• 成果类型: Article
• 署名作者: Ferrara, Laurent; Metelli, Luca; Natoli, Filippo; Siena, Daniele
• 署名单位: SKEMA Business School; Universite Cote d'Azur; European Central Bank; Bank of Italy; Polytechnic University of Milan; European Central Bank; Bank of France; European Central Bank
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2021.103524
• 发表日期: 2021
• 关键词: Fiscal shocks; Real exchange rate; inflation; Proxy-SVAR; narrative shocks

摘要

The paper re-investigates the effects of government spending shocks on the real exchange rate and inflation, using US data. In opposition to some previous puzzling results, we find that an increase in government spending appreciates the real exchange rate and generates inflationary pressures. Positive spending shocks also induce a trade balance deficit and an increase in the nominal interest rate. The discrepancy with the existing literature lies in the identification of fiscal shocks: embedding a narrative instrument within a proxy-SVAR model is what makes the difference. Findings are robust and coherent with a standard open economy business cycle model. Our analysis suggests that proxy-SVAR models are more immune to structural changes in US fiscal policy. (c) 2021 Elsevier B.V. All rights reserved.