search query: @indexterm OPEN ECONOMY / total: 204
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| Author: | Lane, P. R. Perotti, R. |
| Title: | The importance of composition of fiscal policy: evidence from different exchange rate regimes |
| Journal: | Journal of Public Economics
2003 : SEP, VOL. 87:9-10, p. 2253-2279 |
| Index terms: | Fiscal policy Exchange rates Open economy |
| Language: | eng |
| Abstract: | The authors study the macroeconomic effects of fiscal policies in an open economy. They emphasize two transmission mechanisms: the cost channel, by which wage government spending and labour taxes raise the real wage firms must pay, and the exchange rate channel, by which the nominal exchange rate shifts induced by fiscal policy have real effects if prices aand wages are sticky. The latter channel implies that changes in wage government spending or in labour taxation should have different effects under flexible than under fixed exchange rates. In a panel of OECD countries the authors find significant evidence for both channels. Moreover, they find that the real product wage and profitability are more responsive than quantities to fiscal policy innovations. |
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