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Theories of real exchange rate determination: A brief survey

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  • Rapetti, Martin

Abstract

This paper reviews "most popular" theories of real exchange rate (RER) determination. It first presents the basic concepts and definitions. It then goes over the theories. It begins with partial equilibrium models: the purchasing power parity and the Harrod-Balassa-Samuelson. It then follows with models dealing with economies in financial autarky: the tradable and non-tradable model and a standard Keynesian model. It finally surveys models of economies integrated to the international capital markets: the Mundell-Fleming model, the portfolio balance approach, the monetary approach to balance of payment and the intertemporal approach to the current account. The paper closes with some observations and remarks.

Suggested Citation

  • Rapetti, Martin, 2012. "Theories of real exchange rate determination: A brief survey," MPRA Paper 109369, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:109369
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    References listed on IDEAS

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    More about this item

    Keywords

    real exchange rate; models;

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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