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An Empirical Analysis of Ricardian Equivalence on Real Exchange Rate and Current Account: Korea

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  • Chae-Deug Yi
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    Abstract

    This paper investigates the responses of real exchange rate and current account as well as consumption in a small open economy to fiscal policies using an alternative time horizon model. Cointegration tests present that there is no stable relationship between the fiscal variables and the real exchange rate, current account, or consumption. The maximum likelihood estimation suggests that fiscal policies seem not to be much effective as the conventional or finite horizon model predicts. REP with infinite horizons seems to be more conceivable to explaining the fluctuation of consumption, real exchange rate, and current account in Korea. [F31, F32]

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730300080027
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Economic Journal.

    Volume (Year): 17 (2003)
    Issue (Month): 4 ()
    Pages: 61-83

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    Handle: RePEc:taf:intecj:v:17:y:2003:i:4:p:61-83

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    Cited by:
    1. Xiaoyong Cui & Liutang Gong & Ziguan Zhuang, 2008. "Macroeconomic Policies and Foreign Asset Accumulation in a Finite-Horizon Model," Annals of Economics and Finance, Society for AEF, vol. 9(2), pages 293-313, November.

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