Consumption, government spending, and the real exchange rate
Using panel structural VAR analysis and quarterly data from four industrialized countries, we document that an increase in government purchases raises output and private consumption, deteriorates the trade balance, and depreciates the real exchange rate. This pattern of comovement poses a puzzle for...
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| Veröffentlicht in: | Journal of monetary economics 2012-04, Vol.59 (3), p.215-234 |
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| container_end_page | 234 |
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| container_issue | 3 |
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| container_title | Journal of monetary economics |
| container_volume | 59 |
| creator | Ravn, Morten O. Schmitt-Grohé, Stephanie Uribe, Martín |
| description | Using panel structural VAR analysis and quarterly data from four industrialized countries, we document that an increase in government purchases raises output and private consumption, deteriorates the trade balance, and depreciates the real exchange rate. This pattern of comovement poses a puzzle for both neoclassical and Keynesian models. An explanation based on the deep-habit mechanism is proposed. An estimated two-country model with deep-habits is shown to replicate well the observed responses of output, consumption, and the trade balance, and the initial response of the real exchange rate to an estimated government spending shock.
► Cross-country panel VAR estimation of effects of governments spending shocks. ► Government spending increases raise output and private consumption. ► Government spending increases depreciate the real exchange rate. ► A deep-habit model for the international transmission of government spending shocks. ► Model explains the rise in consumption and depreciation of the real exchange rate. |
| doi_str_mv | 10.1016/j.jmoneco.2012.02.001 |
| format | Article |
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► Cross-country panel VAR estimation of effects of governments spending shocks. ► Government spending increases raise output and private consumption. ► Government spending increases depreciate the real exchange rate. ► A deep-habit model for the international transmission of government spending shocks. ► Model explains the rise in consumption and depreciation of the real exchange rate.</description><subject>Balance of trade</subject><subject>Consumption</subject><subject>Developed countries</subject><subject>Economic models</subject><subject>Exchange rates</subject><subject>Foreign exchange rates</subject><subject>Government spending</subject><subject>Household consumption</subject><subject>Industrialized nations</subject><subject>Production</subject><subject>Public expenditure</subject><subject>Studies</subject><subject>Vector-autoregressive models</subject><issn>0304-3932</issn><issn>1873-1295</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2012</creationdate><recordtype>article</recordtype><recordid>eNqFkN1LwzAUxYMoOKd_glDwxYe15qNNWhBEhl8w8EWfQ5bebiltUpN26H9vxvbki3DhcuF3DvcchK4Jzggm_K7N2t5Z0C6jmNAMx8HkBM1IKVhKaFWcohlmOE9Zxeg5ugihxZGoBJ-h-6WzYeqH0Ti7SDZuB972YMckDGBrYzeLRNk6GbeQeFBdAt96q-wmXmqES3TWqC7A1XHP0efz08fyNV29v7wtH1epznk1pk2jVQmcrmte5AoIKTWllGte1vmaigLnmCiKQWkQTcOEILkoC92IsuGYMczm6PbgO3j3NUEYZW-Chq5TFtwUZGyhyHlMyyN68wdt3eRt_G5PYcpZEbk5Kg6U9i4ED40cvOmV_4nQnuOylcdO5b5TieNgEnUPBx3EtDsDXgZtwGqojQc9ytqZfxx-ATaygLg</recordid><startdate>201204</startdate><enddate>201204</enddate><creator>Ravn, Morten O.</creator><creator>Schmitt-Grohé, Stephanie</creator><creator>Uribe, Martín</creator><general>Elsevier B.V</general><general>Elsevier Sequoia S.A</general><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>201204</creationdate><title>Consumption, government spending, and the real exchange rate</title><author>Ravn, Morten O. ; Schmitt-Grohé, Stephanie ; Uribe, Martín</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c469t-ffca8e62bd654ae118c2226c68d4b2750401a20eace7ff37714785cf78f603303</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2012</creationdate><topic>Balance of trade</topic><topic>Consumption</topic><topic>Developed countries</topic><topic>Economic models</topic><topic>Exchange rates</topic><topic>Foreign exchange rates</topic><topic>Government spending</topic><topic>Household consumption</topic><topic>Industrialized nations</topic><topic>Production</topic><topic>Public expenditure</topic><topic>Studies</topic><topic>Vector-autoregressive models</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Ravn, Morten O.</creatorcontrib><creatorcontrib>Schmitt-Grohé, Stephanie</creatorcontrib><creatorcontrib>Uribe, Martín</creatorcontrib><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Journal of monetary economics</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Ravn, Morten O.</au><au>Schmitt-Grohé, Stephanie</au><au>Uribe, Martín</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Consumption, government spending, and the real exchange rate</atitle><jtitle>Journal of monetary economics</jtitle><date>2012-04</date><risdate>2012</risdate><volume>59</volume><issue>3</issue><spage>215</spage><epage>234</epage><pages>215-234</pages><issn>0304-3932</issn><eissn>1873-1295</eissn><coden>JMOEDW</coden><abstract>Using panel structural VAR analysis and quarterly data from four industrialized countries, we document that an increase in government purchases raises output and private consumption, deteriorates the trade balance, and depreciates the real exchange rate. This pattern of comovement poses a puzzle for both neoclassical and Keynesian models. An explanation based on the deep-habit mechanism is proposed. An estimated two-country model with deep-habits is shown to replicate well the observed responses of output, consumption, and the trade balance, and the initial response of the real exchange rate to an estimated government spending shock.
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| ispartof | Journal of monetary economics, 2012-04, Vol.59 (3), p.215-234 |
| issn | 0304-3932 1873-1295 |
| language | eng |
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| source | Elsevier ScienceDirect Journals Complete |
| subjects | Balance of trade Consumption Developed countries Economic models Exchange rates Foreign exchange rates Government spending Household consumption Industrialized nations Production Public expenditure Studies Vector-autoregressive models |
| title | Consumption, government spending, and the real exchange rate |
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