Factors determining exchange rates: the roles of relative price levels, balances of payments, interest rates and risk
AbstractThis paper focuses on an accounting framework that is useful for distinguishing between the effects on exchange rates of four separate factors: relative price levels, balances of payments, interest rates and risk. The framework rests upon an approximate identity, which is transformed into a behavioural model of exchange rates. The model is then applied in an attempt to explain the month-to-month behaviour of the US dollar versus the Deutsche Mark during the 1975-79 period.
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Bibliographic InfoPaper provided by Bank for International Settlements in its series BIS Working Papers with number 4.
Length: 48 pages
Date of creation: Sep 1980
Date of revision:
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- Mussa, Michael, 1976. " The Exchange Rate, the Balance of Payments and Monetary and Fiscal Policy under a Regime of Controlled Floating," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 229-48.
- Pentti J.K. Kouri & Jorge B. de Macedo, 1978. "Exchange Rates and the International Adjustment Process," Cowles Foundation Discussion Papers 488, Cowles Foundation for Research in Economics, Yale University.
- Branson, William H. & Halttunen, Hannu & Masson, Paul, 1977. "Exchange rates in the short run: The dollar-dentschemark rate," European Economic Review, Elsevier, vol. 10(3), pages 303-324.
- Barro, Robert J, 1978. "A Stochastic Equilibrium Model of an Open Economy under Flexible Exchange Rates," The Quarterly Journal of Economics, MIT Press, vol. 92(1), pages 149-64, February.
- John R. Martin & Paul R. Masson, 1979. "Exchange Rates and Portfolio Balance," NBER Working Papers 0377, National Bureau of Economic Research, Inc.
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