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Fiscal shocks and real exchange rate dynamics: Some evidence for Latin America |
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| Authors: | Guglielmo Maria Caporale Davide CiferriAlessandro Girardi |
| Institution: | a Brunel University, London, United Kingdom b CESifo, Munich, Germany c DIW Berlin, Germany d Cassa Depositi e Prestiti, Rome and John Cabot University, Rome, Italy e Ministry of Economic Affairs and Finance, Rome, Italy |
| Abstract: | This paper analyses the effects of fiscal shocks in selected Latin American countries using a two-country model for output, labour input, government spending and relative prices. Dynamic simulation techniques are then applied, in particular to shed light on the possible effects of fiscal imbalances on the real exchange rate. Using quarterly data over the period 1980-2006, we find that in a majority of cases fiscal shocks are the main driving force of real exchange rate fluctuations. |
| Keywords: | C32 E62 O54 |
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