The article examines the relationship between real exchange rates, productivity levels, and government spending in 14 countries. By using advanced panel cointegration tests, the researchers found that it is easier to detect long-term relationships in panel data compared to time series data. They also discovered that the rate of reversion to equilibrium is estimated more accurately. Additionally, when considering oil prices, the study revealed that in 1991, the U.S. dollar was less overvalued than suggested by a simple purchasing power parity calculation.