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

Giulio Cifarelli ()

Open Economies Review, 1995, vol. 6, issue 1, 29-48

Abstract: 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

Keywords: dollar behavior; regime shifts; cointegration analysis (search for similar items in EconPapers)
Date: 1995
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DOI: 10.1007/BF00999042

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