How Does Government Spending News Shock Affect Real Exchange Rate?

Traditional research about government spending shock consider impact on economy only when fiscal policy is actually carried out.In traditional research,there is only surprise shock taken into consideration,which is not correct.Because of time lag of fiscal policy,government spending growth is well anticipated before carried out.There is information about future fiscal policy existing to change expectation,so that people in market can take measures to fit into it before fiscal policy carried out.Our research define surprise shock of government spending as which affect government spending on impact and are only observed when agents see realized spending.While government spending is well anticipated by Survey of Professional Forecasters(SPF)data,as proved by Forni and Gambetti.(2016).Government spending "news shock" or "anticipated shock" is defined as which affect anticipation on impact,and have only delayed effect on government spending.Above all,news shock is believed to be able to be identified and government spending news shock is believed to have significant impact on real exchange rate and other economic variables.Our research is based on Bayesian Variable Autoregressive model,using quarterly data from 1982.1-2016.1 of the US.What is mostly important is that we identify surprise shock by Sign Restriction and identify news shock by Maximum Forecast Error Variance method,we fix surprise shock identified by Sign Restriction in MFEV when identifying news shock.We provide new evidence on the effects of government spending news shock and government spending surprise shock.In our research,we find that real exchange rate depreciate to government spending surprise shock,which is in line with most related empirical research,so there is "depreciation puzzle" to government spending surprise shock.While real exchange rate appreciate to news shock with real long-run interest rate rising.Because anticipation of government spending expanding increase real long run interest rate,so real exchange rate appreciate.