This paper examines the dynamics of the nominal exchange rate and fiscal deficits in a continuous time optimizing general equilibrium model with finite horizon. It is shown that alternative financing modes of budget deficits imply different patterns of adjustment along the transitional path towards the steady state equilibrium. In particular, the respect of public solvency without money financing is not suffcient to avoid the depreciation of the exchange rate in the long-run after a fiscal expansion.

Annicchiarico, B. (2003). Fiscal policy and exchange rates.

Fiscal policy and exchange rates

ANNICCHIARICO, BARBARA
2003-03

Abstract

This paper examines the dynamics of the nominal exchange rate and fiscal deficits in a continuous time optimizing general equilibrium model with finite horizon. It is shown that alternative financing modes of budget deficits imply different patterns of adjustment along the transitional path towards the steady state equilibrium. In particular, the respect of public solvency without money financing is not suffcient to avoid the depreciation of the exchange rate in the long-run after a fiscal expansion.
exchange rates
fiscal deficits
current account dynamics
Annicchiarico, B. (2003). Fiscal policy and exchange rates.
Annicchiarico, B
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/2108/49
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