Budget deficits and the value of the dollar: An application of cointegration and error-correction modeling
AbstractIn this paper we investigate the statistical relation between the U.S. budget deficits and the value of the dollar using cointegration and error-correction techniques. When quarterly data are used over the period 1971-1990, we find no evidence of cointegration. However, when we incorporate 1985 intervention in the foreign exchange market into cointegration analysis, we find strong evidence of cointegration between two variables. The error-correction models yield results that support bidirectional causality between the value of the dollar and budget deficits.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Macroeconomics.
Volume (Year): 15 (1993)
Issue (Month): 4 ()
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Web page: http://www.elsevier.com/locate/inca/622617
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