Congresos y reuniones científicas
Fiscal Deficit and Real Exchange Rate in Argentina. Analysis through an EGDE Model
Congreso; Arnoldshain Seminar XVI; 2019
Institución organizadora:
Bournemouth University
It is well known that the Fiscal Deficit generates deterioration in the Real Exchange Rate. However, the composition of the Fiscal Deficit, whether generated by increase in Expenditure or Tax Reduction, may result in dissimilar effects. In this paper, the differential impact generated by increases in Public Consumption Expenses, Public Investment and Tax Reduction on the Real Exchange Rate is analyzed and quantified. To this end, a Dynamic and Stochastic General Equilibrium Model is developed with the Government and External Sector, which is then calibrated and simulated for Argentina. It is concluded that the Fiscal Deficit originated in tax reduction can improve the Real Exchange Rate while the one generated by any increase in Expenditure deteriorates it. In turn, the deterioration in the Real Exchange Rate is greater when Public Expenditure is applied to Public Consumption than when it is used for Public Investment.