Budget deficits and the value of the dollar: An application of cointegration and error-correction modeling
In 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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:15:y:1993:i:4:p:661-677. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.