The paper explores how international integration through global value chains shapes the working of exchange rates to induce external adjustment both in the short and medium run. The analysis indicates that greater integration into international value chains reduces the exchange rate elasticity...

The strong US policy response to the 2008-09 financial crisis raised concerns about its impact (spillovers) on other countries, with great focus on the monetary stimulus but little attention to fiscal policy, despite their combined deployment. Using a sign-restricted structural VAR approach, we...