Fiscal deficits and mean reversion in real exchange rates
Qi Li and
Jian Yang ()
Economics Letters, 2013, vol. 118, issue 2, 300-303
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)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:118:y:2013:i:2:p:300-303
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