Government spending and the exchange rate |
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| Authors: | Faik Koray Pingfai Chan |
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| Institution: | Department of Economics , Louisiana State University , Baton Rouge , Louisiana , 70803 , USA |
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| Abstract: | This paper investigates the effects of govenment spending on real and nominal exchange rates within the context of an open economy equilibrium rational expectations model. The model predicts that both real and nominal exchange rates appreciate in response to anticipated and unanticipated increases in government spending. Empirical evidence from Germany for the period 1975:2–1989:4 provides some weak support for the predictions of the model. |
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