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Post Keynesian versus neoclassical explanations of exchange rate movements: a short look at the long run

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  • JOHN T. HARVEY

Abstract

In this paper, a series of empirical tests are conducted comparing the explanatory power of the neoclassical approach (in particular, purchasing power parity and the monetary model) with that of a long-run exchange rate model based on Post Keynesian premises (the tests use annual data for the dollar- deutsche mark and the dollar-yen from 1975 through 1998). It is shown that, despite the shift in time horizon and the biasing of the tests in favor of the neoclassical approach, the Post Keynesian approach still shows a much tighter fit to the historical facts.

Suggested Citation

  • John T. Harvey, 2005. "Post Keynesian versus neoclassical explanations of exchange rate movements: a short look at the long run," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 28(2), pages 161-179.
    • Handle: RePEc:mes:postke:v:28:y:2005:i:2:p:161-179
    DOI: 10.2753/PKE0160-3477280201
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    Cited by:

    1. Basil Oberholzer, 2021. "Managing commodity booms: Dutch disease and economic performance," PSL Quarterly Review, Economia civile, vol. 74(299), pages 307-323.
    2. Francisco A. Martínez-Hernández, 2017. "The Political Economy of Real Exchange Rate Behavior: Theory and Empirical Evidence for Developed and Developing Countries, 1960–2010," Review of Political Economy, Taylor & Francis Journals, vol. 29(4), pages 566-596, October.
    3. Sajid Ali, 2016. "How does Interest rate effect Exchange rate of Pakistan. Evidence of ARDL Bound Testing Approach," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(2), pages 119-133, October.

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