(AGENPARL) – WASHINGTON mer 22 giugno 2022
June 2022
Trade policies and fiscal devaluations
Christopher Erceg, Andrea Prestipino, and Andrea Raffo
Abstract:
Fiscal devaluations—an increase in import tariffs and export subsidies (IX) or an increase in value-added taxes and payroll subsidies (VP)—have been shown to provide as much stimulus under fixed exchange rates as a currency devaluation. We find that if agents expect policies to be reversed and the tax pass-through is large, VP is contractionary and IX provides a modest boost. In our medium-scale DSGE model, both features are crucial in accounting for Germany’s underperformance in response to VP in 2007. These findings cast doubt on fiscal devaluations as a cyclical stabilization tool when monetary policy is constrained.
Keywords: Exchange Rates, Fiscal Devaluations, Trade Policies
DOI: https://doi.org/10.17016/IFDP.2022.1347
PDF:
Full Paper
Last Update:
June 22, 2022
0https://www.federalreserve.gov/econres/ifdp/files/ifdp1347.pdf’>https://www.federalreserve.gov/econres/ifdp/files/ifdp1347.pdf
Fonte/Source: https://www.federalreserve.gov/econres/ifdp/trade-policies-and-fiscal-devaluations.htm