Fiscal Policies and the Dollar/Pound Exchange Rate: 1870-1984 / Vittorio U. Grilli.

Format:

Book

Author/Creator:

Grilli, Vittorio U.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2482.

NBER working paper series no. w2482

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1988.

Summary:

This paper investigates the consequences of fiscal policies for the exchange rate. After developing a simple theory of how government financing policies should effect the exchange rate, we test it using data on the dollar/pound exchange rate. Previous analyses have concentrated mainly on the past-Bretton Woods flexible exchange rate system, thus ignoring potentially useful information contained In fixed exchange rate periods or in previous flexible exchange rate periods. This paper shows that it is theoretically proper and econometrically feasible to merge evidence from different nominal exchange rate systems. The gain of this procedure is that we can extend the sample period back to the 1870's. Our results suggest that permanent government expenditures are the only fiscal variables that significantly affected the dollar/pound nominal exchange rate. Budget deficits appear to be irrelevant in this respect.

Notes:

Print version record

1988.