Abstract
Contrary to earlier studies, surprisingly large US trade deficits are shown to have a significant effect on exchange rates throughout the 1980s. Three possible reasons for the time-varying effect are considered. The evidence presented yields the following inference: deficit news is likely to have changed expectations of Fed intervention that moved exchange rates; deficit news probably has an effect on revisions of future deficit expectations and exchange rates change as a result; and deficit news may change expectations regarding US trade policy that is reflected in exchange rates.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
