Exchange rate pass-through and fiscal multipliers

This paper develops a small open economy model with nominal rigidities and search-matching frictions to study the implications of the degree of exchange rate pass-through for fiscal multipliers. I allow for delayed pass-through to both imported consumption goods prices and imported intermediate good...

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Bibliographic Details
Published in:The B.E. journal of macroeconomics 2013-09, Vol.13 (1), p.1
Main Author: Cheng, Chak Hung Jack
Format: Article
Language:English
Subjects:
Economic models
Fiscal policy
Foreign exchange rates
Imports
Output
Studies
Unemployment
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Summary:This paper develops a small open economy model with nominal rigidities and search-matching frictions to study the implications of the degree of exchange rate pass-through for fiscal multipliers. I allow for delayed pass-through to both imported consumption goods prices and imported intermediate goods prices. The result shows that incomplete exchange rate pass-through to imported goods prices dampens the fiscal impact on output and unemployment. However, incomplete pass-through to imported input prices has little effect on the output and unemployment multipliers. [PUBLICATION ABSTRACT]
ISSN:2194-6116
1935-1690