NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Real Exchange Rate Effects of Fiscal Policy

Jeffrey Sachs, Charles Wyplosz

NBER Working Paper No. 1255
Issued in 1984
NBER Program(s):   ITI   IFM

This paper develops a framework for analyzing the effects of fiscal policy on the real exchange rate. The short-run impact of various types of fiscal measures are considered as well as the dynamics of adjustment to long-run steady states. The analysis and related simulations suggest that the effect of fiscal policy changes on the real exchange rate can vary widely and will depend closely on a number of structural features, including the degree of asset substitutability,the composition of government spending, and the initial size of the public debt and net external position.

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Document Object Identifier (DOI): 10.3386/w1255

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