TY  - JOUR
AU  - Grilli,Vittorio U.
TI  - Fiscal Policies and the Dollar/Pound Exchange Rate:  1870-1984
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2482
PY  - 1988
Y2  - 1988
UR  - http://www.nber.org/papers/w2482
L1  - http://www.nber.org/papers/w2482.pdf
N1  - Author contact info:
Vittorio U. Grilli
Ministero di Tesaro
Capo del Servizio T
via XX se tembre 97
Roma 00187 ITALY
Tel: 44/71/631-6407
E-Mail: Vittorio.grilli@tesoro.it
M2  - featured in NBER digest on 1988-05-01
AB  - This paper investigates the consequences of fiscal policies for the exchange rate. After developing a simple theory of how government financing policies should effect the exchange rate, we test it using data on the dollar/pound exchange rate. Previous analyses have concentrated mainly on the past-Bretton Woods flexible exchange rate system, thus ignoring potentially useful information contained In fixed exchange rate periods or in previous flexible exchange rate periods. This paper shows that it is theoretically proper and econometrically feasible to merge evidence from different nominal exchange rate systems. The gain of  this procedure is that we can extend the sample period back to the 1870's.  Our results suggest that permanent government expenditures are the only fiscal variables that significantly affected the dollar/pound nominal exchange rate. Budget deficits appear to be irrelevant in this respect.
ER  -