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Fundamentals, regime shifts, and dollar behavior in the 1980s

  • Giulio Cifarelli

I provide an economic interpretation of the long swings of the dollar in the 1980s. I use the “fully modified” estimator method to analyze the long-run behavior of the dollar/sterling exchange rate over the period 1979–1989, detecting a structural shift in February–March 1985. In the 1979–1985 subperiod economic agents have reacted to a reduced set of fundamentals only, a finding that might corroborate the “irrational behavior” interpretation of the dollar upswing. In the 1985–1989 subperiod economic agents have associated the equilibrium value of the dollar with the behavior of a more balanced set of fundamentals. Copyright Kluwer Academic Publishers 1995

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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 6 (1995)
Issue (Month): 1 (January)
Pages: 29-48

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Handle: RePEc:kap:openec:v:6:y:1995:i:1:p:29-48
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