Determinants Of Exchange Rate Fluctuations For Venezuela: Application Of An Extended Mundell-Fleming Model
AbstractApplying and extending the Mundell-Fleming model, this study attempts to examine the behavior of short-term real exchange rates for Venezuela. It finds that the real effective exchange rate is positively associated with real government deficit spending and negatively influenced by real M2, the world interest rate, county risk, and the expected inflation rate. Hence, the authorities need to exercise fiscal discipline so that deficit spending would not be too large to cause real appreciation and hurt exports. When country risk rises due to the financial, economic or political factors, real exchange rates would depreciate.
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Bibliographic InfoArticle provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.
Volume (Year): 6 (2006)
Issue (Month): 1 ()
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Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
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