Foreign-Currency Debt and Government Spending Shocks
2014/01/17
研討會日期 : 2014-01-17
時間 : 10:30
主講人 : Ms. Cheng-Ying Yang
地點 : Conference Room B110
演講者簡介 : Ms. Cheng-Ying Yang will receive her Ph.D. in Economics from University of Wisconsin-Madison in 2014. Her primary research field is in International Macroeconomics & International Finance and secondary is in Applied Time Series Econometrics. She is applying for the position of the Institute of Economics, AS right now.
演講摘要 : Using panel structural VAR analysis with quarterly data from six emerging Latin American countries, we document that the effects of government spending shocks depend on the share of public debt denominated in foreign currency. In countries with a larger fraction of public debt denominated in foreign currency, there are larger increases in output and private consumption and a longer-lived debt accumulation in response to government spending shocks. To offer a theoretical explanation of these observed patterns, we develop a small open economy dynamic stochastic general equilibrium model and compare two specifications which differ in the assumption about the currency denomination of debt. We estimate policy parameters for these two specifications to match the observed differences in responses of debt-to-GDP ratio, private consumption, and output. Conducting a counterfactual experiment, where policy parameters are held constant, we quantify how much of the differences can be explained by the currency denomination of debt per se. We find that currency denomination of debt explains 18% of output differences, 20% of consumption differences, and 17% of higher debt accumulation following an innovation in government spending. Moreover, we discuss the channels through which the currency denomination of debt affects the dynamic responses of output, consumption and the debt-to-GDP ratio.
