39-47

• Hsing, Yu

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. Ql. 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.

• Economics and Business
• Computer and information sciences

• Macroeconomics
• Finance
• Statistics

expected real depreciation or appreciation, monetary policy reaction function, fiscal policy, financial stock price, uncovered interest parity

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