Cover IMF Working Papers
Fiscal Policy and the Exchange Rate-Current Account Nexus
Author: Mr. Jun I Kim
Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 027
Language:
English
Publication Date:
01 Feb 2007
DOI:
https://doi.org/10.5089/9781451865912.001
ISBN:
9781451865912
ISSN:
1018-5941
Pages:
13
Keywords:
WP; exchange rate
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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By using a simple intertemporal model of the current account, I show that the exchange rate elasticity of the trade balance would ceteris paribus be smaller for countries with higher government spending ratios (relative to GDP) and with more limited scope for private consumption smoothing. This finding may have important implications for the design of adjustment programs and for resolving current global imbalances. It could also help explain and reconcile mixed empirical findings on trade elasticities.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund