Factors determining exchange rates: the roles of relative price levels, balances of payments, interest rates and risk
This paper focuses on an accounting framework that is useful for distinguishing between the effects on exchange rates of four separate factors: relative price levels, balances of payments, interest rates and risk. The framework rests upon an approximate identity, which is transformed into a behavioural model of exchange rates. The model is then applied in an attempt to explain the month-to-month behaviour of the US dollar versus the Deutsche Mark during the 1975-79 period.
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- 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.
- Robert J. Barro, 1978. "A Stochastic Equilibrium Model of an Open Economy Under Flexible Exchange Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 92(1), pages 149-164.
- Pentti J.K. Kouri & Jorge B. de Macedo, 1978. "Exchange Rates and the International Adjustment Process," Cowles Foundation Discussion Papers 488, Cowles Foundation for Research in Economics, Yale University.
- John R. Martin & Paul R. Masson, 1979. "Exchange Rates and Portfolio Balance," NBER Working Papers 0377, National Bureau of Economic Research, Inc.
- Branson, William H. & Halttunen, Hannu & Masson, Paul, 1977. "Exchange rates in the short run: The dollar-dentschemark rate," European Economic Review, Elsevier, vol. 10(3), pages 303-324.
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