• Published 2001

T he importance of composition of fiscal policy: evidence from different exchange rate regimes

@inproceedings{Lane2001THI,
  title={T he importance of composition of fiscal policy: evidence from different exchange rate regimes},
  author={Philip R. Lane and Roberto Perotti},
  year={2001}
}
We study the macroeconomic effects of fiscal policies in an open economy. We emphasize two transmission mechanisms: the cost channel, by which wage government spending and labor taxes raise the real wage firms must pay, and the exchange rate channel, by which the nominal exchange rate shifts induced by fiscal policy have real effects if (some) prices and wages are sticky. The latter channel implies that changes in wage government spending or in labor taxation should have different effects under… CONTINUE READING