The Review of Economics and Statistics Vol. 71 No. 3 1989
The U.S. Budget Deficit and the Foreign Exchange Value of the Dollar
Abstract
This paper presents and estimates a simple model of real exchange rate determination that includes the expected future U.S. federal budget deficit as a determinant. The model is applied to the real value of the dollar versus the mark, yen, and pound over the period June 1974-October 1987. The estimates suggest that rapid increases in the expected future deficit in the early 1980s contributed to a rapid appreciation of the dollar. The fall in the value of the dollar in the spring of 1985 appears to be due to a fall in the expected budget deficit.
- DOI
- 10.2307/1926907
- Volume
- 71
- Issue
- 3
- Pages
- 500
- Sources
- crossref openalex