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A Classroom Guide to the Equilibrium Exchange Rate Model


  • S Da Silva


The article presents a classroom-suited version of the equilibrium exchange rate model of Stockman (1987) that features Cobb-Douglas functional forms for both production and utility, and considers foreign exchange intervention explicitly.

Suggested Citation

  • S Da Silva, 2002. "A Classroom Guide to the Equilibrium Exchange Rate Model," Economic Issues Journal Articles, Economic Issues, vol. 7(2), pages 1-10, September.
  • Handle: RePEc:eis:articl:202dasilva

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    References listed on IDEAS

    1. Svensson, Lars E. O., 1985. "Currency prices, terms of trade, and interest rates: A general equilibrium asset-pricing cash-in-advance approach," Journal of International Economics, Elsevier, vol. 18(1-2), pages 17-41, February.
    2. Stockman, Alan C, 1980. "A Theory of Exchange Rate Determination," Journal of Political Economy, University of Chicago Press, vol. 88(4), pages 673-698, August.
    3. Giancarlo Corsetti & Paolo Pesenti, 2001. "Welfare and Macroeconomic Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 421-445.
    4. V. V Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 533-563.
    5. Stockman, Alan C. & Stockman, Alan C., 1983. "Real exchange rates under alternative nominal exchange-rate systems," Journal of International Money and Finance, Elsevier, vol. 2(2), pages 147-166, August.
    6. Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 13-47, March.
    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. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
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    Cited by:

    1. repec:ebl:ecbull:v:6:y:2008:i:29:p:1-13 is not listed on IDEAS
    2. Guilherme Moura & Sergio Da Silva, 2005. "Testing the Equilibrium Exchange Rate Model," International Finance 0505018, EconWPA.
    3. Guilherme, Moura & Sergio, Da Silva, 2006. "Testing the Equilibrium Exchange Rate Model - Updated," MPRA Paper 1871, University Library of Munich, Germany.
    4. Sergio Da Silva & Leandro Stocco & J. Anchieta Neves, 2008. "Is Mercosur an optimum currency area? An assessment using generalized purchasing power parity," Economics Bulletin, AccessEcon, vol. 6(29), pages 1-13.
    5. Luo, Robin & Visaltanachoti, Nuttawat, 2010. "Real exchange rates, asset prices and terms of trade: A theoretical analysis," Economic Modelling, Elsevier, vol. 27(1), pages 143-151, January.
    6. Hiroya Akiba & Yukihiro Iida & Yoshihiro Kitamura, 2009. "The optimal exchange rate regime for a small country," International Economics and Economic Policy, Springer, vol. 6(3), pages 315-343, October.
    7. Sergio Da Silva, 2004. "International Finance, Levy Distributions, and the Econophysics of Exchange Rates," International Finance 0405018, EconWPA.
    8. Neves, J. Anchieta & Stocco, Leandro & Da Silva, Sergio, 2007. "Is Mercosur an optimum currency area?," MPRA Paper 2758, University Library of Munich, Germany.
    9. Da Silva, Sergio & Nunes, Mauricio, 2007. "Latin American foreign exchange intervention - Updated," MPRA Paper 1982, University Library of Munich, Germany.

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    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance


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