The paper re-investigates the effects of government spending shocks on the real exchange rate and inflation. In contrast with some previous puzzling results, we find that an increase in government spending appreciates the real exchange rate and is inflationary; besides, it induces a trade...

This paper focuses on growth enhancing budget-neutral fiscal reforms, i.e. changes in the composition of government revenues and spending that stimulate GDP growth while keeping the ratio of the fiscal budget to GDP constant. To this aim, we present simulation results using a multi-country DSGE...

The paper re-investigates the effects of government spending shocks on the real exchange rate and inflation, using US data. In opposition to some previous puzzling results, we find that an increase in government spending appreciates the real exchange rate and generates inflationary pressures....