The effects of government spending on consumption and the real exchange rate: a comparison between developed and developing countries
Li, Yu Zhu, Xiaoyang
Li, Yu
Zhu, Xiaoyang
Authors
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Location
Time Period
Advisors
Original Date
Digitization Date
Issue Date
2023-02-13
Type
Article
Genre
Keywords
Consumption,The real exchange rate,VAR,Fiscal shock
Subjects (LCSH)
Citation
Li, Y. and Zhu, X. (2023), "The effects of government spending on consumption and the real exchange rate: a comparison between developed and developing countries", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-11-2020-1395
Abstract
Purpose – The degree of development and the way to identify a fiscal shock matter in evaluating the effects of
the fiscal policy. This paper contributes to the debate on the effects of a fiscal expansion on private
consumption and the real effective exchange rate.
Design/methodology/approach – This paper uses a sign-restriction method to identify a fiscal shock in the
panel structural VAR analysis in the context of both developed and developing countries.
Findings – The authors’ find that (1) private consumption increases in response to a positive government
spending shock in both groups, yet such consumption effect is greater in developing than industrial countries;
(2) the response of real effective exchange rate to the government spending shock varies across groups: it
depreciates in developed countries and appreciates in developing countries; (3) trade balance improves in both
groups.
Originality/value – This study sheds light on the differential
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Publisher
Emerald Publishing Limited
Journal
Book Title
Series
International Journal of Emerging Markets
2023
2023
Digital Collection
Finding Aid URL
Use and Reproduction
Archival Collection
PubMed ID
DOI
ISSN
1746-8809