Basic Exchange Rate Theories
AbstractThis four-chapter overview of basic exchange rate theories discusses (i) the elasticity and absorption approach, (ii) the (long-run) implications of the monetary approach, (iii) the short-run effects of monetary and fiscal policy under various economic conditions, and (iv) the transition from short-run to long-run in a sticky-price model with rational expectations. We provide ample anecdotal, historical, and heuristic information on the goodness-of-fit of the various exchange rate models based on simple graphs, statistics, and tests. Details are provided in technical notes.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-024/2.
Date of creation: 23 Feb 2005
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exchange rates; expectations; monetary approach; elasticity; absorption; overshooting; monetary policy; fiscal policy;
Other versions of this item:
- Charles Van Marrewijk, 2005. "Basic Exchange Rate Theories," Centre for International Economic Studies Working Papers 2005-01, University of Adelaide, Centre for International Economic Studies.
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