Can postgresql (specifically 9.6) stored procedures read/modify a separate database, or can they only operate on data within the local database where they are defined?
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Postgres 9.6 does not have stored procedures, which were introduced with Postgres 11.
You probably mean Postgres functions, which have been there since time immemorial. It's a widespread misconception to call those "stored procedures".
Both are confined to the database in which they are executed - as Postgres will tell you if you try to prefix a database name to an object name:
ERROR: cross-database references are not implemented:
Unless you use the Foreign Data Wrapper infrastructure (you probably want the additional module postgres_fdw with that) or dblink, which allow exactly that after all ...

Erwin Brandstetter
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