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Real Exchange Rates and Macroeconomics: A Selective Survey

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  • Dornbusch, Rudiger

Abstract

This paper discusses real exchange rate issues of industrial and developing countries. For real exchange rates among the key industrial countries, the author asks what is the best conceptual framework. To shed light on this questions, he looks at alternative theoretical approaches and at empirical evidence on the relations among interest rates, expectations, and depreciation. The discussion of developing countries' real exchange rates focuses on the link between real exchange rates, real wages, and the profitability of capital. The model highlights the discrepancy between the mobility of capital (including, in the long run, physical capital) and the immobility of labor. Copyright 1989 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Dornbusch, Rudiger, 1989. " Real Exchange Rates and Macroeconomics: A Selective Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 91(2), pages 401-432.
  • Handle: RePEc:bla:scandj:v:91:y:1989:i:2:p:401-32
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    References listed on IDEAS

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    1. Eichengreen, Barry, 1988. "Real exchange rate behavior under alternative international monetary regimes : Interwar evidence," European Economic Review, Elsevier, vol. 32(2-3), pages 363-371, March.
    2. Allan Drazen & Elhanan Helpman, 1987. "Stabilization with Exchange Rate Management under Uncertainty," NBER Working Papers 2268, National Bureau of Economic Research, Inc.
    3. Rudiger Dornbusch & Jeffrey A. Frankel, 1987. "The Flexible Exchange Rate System: Experience and Alternatives," NBER Working Papers 2464, National Bureau of Economic Research, Inc.
    4. Marianne Baxter & Alan C. Stockman, 1988. "Business Cycles and the Exchange Rate System: Some International Evidence," NBER Working Papers 2689, National Bureau of Economic Research, Inc.
    5. Frankel, Jeffrey A., 1986. "The implications of mean-variance optimization for four questions in international macroeconomics," Journal of International Money and Finance, Elsevier, vol. 5(1, Supple), pages 53-75, March.
    6. Allan Drazen & Elhanan Helpman, 1987. "Stabilization with Exchange Rate Management," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 835-855.
    7. Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
    8. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
    9. Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 865-890, October.
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