IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/0949.html
   My bibliography  Save this paper

A Synthesis of Keynesian, Monetary, and Portfolio Approaches to FlexibleExchange Rates

Author

Listed:
  • Thorvaldur Gylfason
  • John F. Helliwell

Abstract

This paper presents a simple synthesis of Keynesian, monetary, and portfolio approaches to macroeconomic theory under flexible exchange rates. By including the key features of all the partial approaches in a general model, we show that some of the important contrasts that have been drawn between the approaches are due to a neglect of repercussions elsewhere in the economy. After reconciling these false contrasts, we show how some of the approaches still give different predictions about the effects of monetary and fiscal policy using differing assumptions about the international mobility of goods and financial assets.

Suggested Citation

  • Thorvaldur Gylfason & John F. Helliwell, 1982. "A Synthesis of Keynesian, Monetary, and Portfolio Approaches to FlexibleExchange Rates," NBER Working Papers 0949, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0949
    Note: ITI IFM
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w0949.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Masson, Paul R., 1981. "Dynamic stability of portfolio balance models of the exchange rate," Journal of International Economics, Elsevier, vol. 11(4), pages 467-477, November.
    2. Frenkel, Jacob A, 1976. " A Monetary Approach to the Exchange Rate: Doctrinal Aspects and Empirical Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 200-224.
    3. 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 229-248.
    4. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
    5. Frenkel, Jacob A & Glyfason, Thorvaldur & Helliwell, John F, 1980. "A Synthesis of Monetary and Keynesian Approaches to Short-Run Balance-of-Payments Theory," Economic Journal, Royal Economic Society, vol. 90(359), pages 582-592, September.
    6. Magee, Stephen P, 1976. "The Empirical Evidence on the Monetary Approach to the Balance of Payments and Exchange Rates," American Economic Review, American Economic Association, vol. 66(2), pages 163-170, May.
    7. Robert A. Mundell, 1962. "The Appropriate Use of Monetary and Fiscal Policy for Internal and External Stability," IMF Staff Papers, Palgrave Macmillan, vol. 9(1), pages 70-79, March.
    8. Frankel, Jeffrey A, 1979. "On the Mark: A Theory of Floating Exchange Rates Based on Real Interest Differentials," American Economic Review, American Economic Association, vol. 69(4), pages 610-622, September.
    9. Dornbusch, Rudiger & Fischer, Stanley, 1980. "Exchange Rates and the Current Account," American Economic Review, American Economic Association, vol. 70(5), pages 960-971, December.
    10. Kouri, Pentti J K, 1976. " The Exchange Rate and the Balance of Payments in the Short Run and in the Long Run: A Monetary Approach," Scandinavian Journal of Economics, Wiley Blackwell, vol. 78(2), pages 280-304.
    11. James Tobin & Jorge B. de Macedo, 1979. "The Short-Run Macroeconomics of Floating Exchange Rates: An Exposition," Cowles Foundation Discussion Papers 522, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pagoulatos, Emilio & Shonkwiler, J. Scott & Canler, Edward, 1984. "An Empirical Analysis Of Macroeconomic Factors Influencing The Agricultural Exchange Rate Of The Dollar," 1984 Annual Meeting, August 5-8, Ithaca, New York 279078, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Thorvaldur Gylfason & Gylfi Zoega, 2017. "The Dutch Disease in Reverse: Iceland's Natural Experiment," CESifo Working Paper Series 6513, CESifo.
    3. Saliu Mojeed Olanrewaju, 2021. "Financial System Stability and Manufacturing Performance in Nigeria," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(1), pages 109-118, January.
    4. Narayan, Paresh Kumar, 2008. "Estimating exchange rate responsiveness to shocks," Review of Financial Economics, Elsevier, vol. 17(4), pages 338-351, December.
    5. Paresh Kumar Narayan, 2008. "Estimating exchange rate responsiveness to shocks," Review of Financial Economics, John Wiley & Sons, vol. 17(4), pages 338-351, December.
    6. Hafsa Hina & Abdul Qayyum, 2015. "Re-estimation of Keynesian Model by Considering Critical Events and Multiple Cointegrating Vectors," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(2), pages 123-145.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Frenkel, Jacob A. & Mussa, Michael L., 1985. "Asset markets, exchange rates and the balance of payments," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 14, pages 679-747, Elsevier.
    2. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2009. "How Stable Are Monetary Models of the Dollar-Euro Exchange Rate?: A Time-Varying Coefficient Approach," Discussion Papers of DIW Berlin 944, DIW Berlin, German Institute for Economic Research.
    3. Agnès Bénassy & Henri Sterdyniak, 1992. "La détermination des taux de change dans les modèles multinationaux : l'état de l'art," Économie et Prévision, Programme National Persée, vol. 104(3), pages 39-71.
    4. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2011. "The dollar-euro exchange rate and macroeconomic fundamentals: a time-varying coefficient approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(1), pages 11-40, April.
    5. Obstfeld, Maurice & Stockman, Alan C., 1985. "Exchange-rate dynamics," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 2, chapter 18, pages 917-977, Elsevier.
    6. repec:zbw:rwirep:0134 is not listed on IDEAS
    7. Hina, Hafsa & Qayyum, Abdul, 2015. "Exchange Rate Determination and Out of Sample Forecasting: Cointegration Analysis," MPRA Paper 61997, University Library of Munich, Germany.
    8. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2009. "How Stable Are Monetary Models of the Dollar-Euro Exchange Rate? - A Time-varying Coefficient Approach," Ruhr Economic Papers 0134, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    9. Suresh Ramakrishnan & Shamaila Butt & Melati Ahmad Anuar, 2017. "The Impact of Macroeconomic, Oil Prices and Socio-economic Factors on Exchange Rate in Pakistan: An Auto Regressive Distributed Lag Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 7(1), pages 489-499.
    10. Robert Murphy & Carl Duyne, 1980. "Asset market approaches to exchange rate determination: A comparative analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 116(4), pages 627-656, December.
    11. Dibooglu, Selahattin, 1993. "Multiple cointegration and structural models: applications to exchange rate determination," ISU General Staff Papers 1993010108000011419, Iowa State University, Department of Economics.
    12. Levent KORAP, 2008. "Exchange Rate Determination Of Tl/Us$:A Co-Integration Approach," Istanbul University Econometrics and Statistics e-Journal, Department of Econometrics, Faculty of Economics, Istanbul University, vol. 7(1), pages 24-50, May.
    13. Martin D.D. Evans & Richard K. Lyons, 2017. "Order Flow and Exchange Rate Dynamics," World Scientific Book Chapters, in: Studies in Foreign Exchange Economics, chapter 6, pages 247-290, World Scientific Publishing Co. Pte. Ltd..
    14. Cheng, Fuzhi & Orden, David, 2005. "Exchange rate misalignment and its effects on agricultural producer support estimates," MTID discussion papers 81, International Food Policy Research Institute (IFPRI).
    15. Maggiori, Matteo, 2021. "International Macroeconomics With Imperfect Financial Markets," SocArXiv z8g6r, Center for Open Science.
    16. Adeline Bachellerie & Jérôme Héricourt & Valérie Mignon, 2009. "From various degrees of trade to various degrees of financial integration: What do interest rates have to say?," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 64(03), pages 365-402, December.
    17. M. Ali Kemal & Rana Murad Haider, 2004. "Exchange Rate Behaviour after Recent Float: The Experience of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 829-852.
    18. Henri Sterdyniak & Éric Bleuze, 1988. "L'interdépendance des économies en change flexible : les apports d'une maquette dynamique," Revue Économique, Programme National Persée, vol. 39(5), pages 999-1034.
    19. Néstor A. Le Clech, 2006. "Ajuste de los fundamentos del modelo monetario en la determinación del tipo de cambio argentino," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 44(2), pages 59-79, Diciembre.
    20. R. Scott Hacker & Hyunjoo Kim Karlsson & Kristofer Månsson, 2012. "The Relationship between Exchange Rates and Interest Rate Differentials: A Wavelet Approach," The World Economy, Wiley Blackwell, vol. 35(9), pages 1162-1185, September.
    21. Stavarek, Daniel, 2004. "Stock Prices and Exchange Rates in the EU and the USA: Evidence of their Mutual Interactions," MPRA Paper 7297, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0949. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.