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Fiscal deficits and mean reversion in real exchange rates

Jingping Gu, Qi Li and Jian Yang ()

Economics Letters, 2013, vol. 118, issue 2, 300-303

Abstract: The mean reversion of real exchange rates in G5 countries depends on both countries’ fiscal deficits/surplus in a nonlinear way. When the fiscal policy pushes the real exchange rate to be deviated further away from the equilibrium level, the mean reversion process is faster.

Keywords: Fiscal deficits; Real exchange rates; Non-additive and nonlinear effects (search for similar items in EconPapers)
JEL-codes: C14 F31 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:eee:ecolet:v:118:y:2013:i:2:p:300-303