This study employs the heteroskedasticity‐robust variance ratio test and the modified rescaled range analysis to examine the short‐term and long‐term behavior of foreign exchange rates. The empirical results suggest that four of the five weekly nominal exchange rates examined exhibit short‐term dependence. Further, there is evidence of long‐term dependence in the nominal exchange rate series. The results also indicate that the real exchange rates generally exhibit short‐term independence, and the lack of strong evidence in favor of long‐term dependence in real exchange rates indicates that the purchasing power parity may not hold in the long run.

No abstract

The "crowding out" effect of debt-financed government spending on the private sector consumption-saving decision and on private investment behavior has been a controversial subject for several years. Do increases in debt-financed government spending stimulate private consumption and saving in the short run, as well as private consumption in subsequent periods? Or does the realization that future taxes must be raised to finance repayment of the debt result in a lack of stimulus for consumption as well as no detrimental impact on subsequent private saving? This article empirically tests for the presence and/or magnitude of tax discounting and crowding out, carefully distinguishing between the two, and decomposes government debt instruments according to their maturities in order to determine impact due to a reorientation of debt structure. The results do not support the existence of tax discounting, suggesting instead that government deficits do stimulate current consumption. Copyright 1992 Western Economic Association International.