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Title:Test of an inverted J-shape hypothesis between the expected real exchange rate and real output: The case of Ireland PDF Logo
Authors:Hsing, Yu
Issue Date:2010
Citation:[Journal:] International Journal of Economic Sciences and Applied Research [ISSN:] 1791-3373 [Volume:] 3 [Year:] 2010 [Issue:] 1 [Pages:] 39-47
Abstract:Applying an open-economy macroeconomic model, incorporating the monetary policy reaction function and uncovering interest parity, this paper finds that the expected real exchange rate and real output exhibit an inverted J-shape relationship, suggesting that expected real depreciation increases real output during 1999.Q2-2001.Q3 whereas expected real appreciation raises output during 2001.Q4-2009.Q1. Other findings show that a higher real financial stock price, a higher world real interest rate, or a lower expected inflation rate would increase real output. Fiscal prudence may be needed as the coefficient of the government borrowing/GDP ratio is insignificant at the 10% level.
Subjects:expected real depreciation or appreciation
monetary policy reaction function
fiscal policy
financial stock price
uncovered interest parity
JEL:E52
F31
F41
O52
Document Type:Article
Appears in Collections:International Journal of Economic Sciences and Applied Research (IJESAR)

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