The paper re-investigates the effects of government spending shocks on the real exchange rate, inflation and the trade balance. In contrast with previous puzzling results, we find that an increase in government spending appreciates the real exchange rate, is inflationary, induces a trade balance deficit and decreases consumption. The difference with the existing literature lies in the identification of fiscal shocks: embedding a narrative approach in a proxy-SVAR drives our new results. We then show that the empirical findings are consistent with a standard estimated open economy model.