IDEAS home Printed from
   My bibliography  Save this article

Real Exchange Rates and Macroeconomics: Evidence and Theory


  • Michael B. Devereux


Since the early 1980s, a large body of research has thrown doubt on the relevance of macroeconomic models for understanding exchange rates. The authors argue that a balanced reading of recent literature in exchange rate economics gives a more optimistic assessment. Many studies have established the pertinence of long-run purchasing power parity (PPP) and the explanatory power of macroeconomic fundamentals in real exchange rate fluctuations. A reasonably strong case can be made for a traditional macroeocnomic interpretation of real exchange rates, which emphasizes short-run price stickiness, but long-run PPP. But a central new ingredient in this interpretation is the presence of international commodity market segmentation and persistent deviations from the 'law of one price.' An example is given of a dynamic general equilibrium model that can reproduce some of the observed features of real exchange rate fluctuations.

Suggested Citation

  • Michael B. Devereux, 1997. "Real Exchange Rates and Macroeconomics: Evidence and Theory," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 773-808, November.
  • Handle: RePEc:cje:issued:v:30:y:1997:i:4:p:773-808

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item


    Access and download statistics


    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:cje:issued:v:30:y:1997:i:4:p:773-808. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    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.

    We have no bibliographic references for this item. You can help adding them by using 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: Prof. Werner Antweiler (email available below). General contact details of provider: .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.