Equilibrium exchange rate theories under flexible exchange rate regimes
Economic theory refers to several notions of the exchange rate equilibrium value in a flexible exchange rate regime. It has been defined as that consistent with : a) the equilibrium of trade balance; b)the equilibrium of current account; c) the overall equilibrium of the balance of payments; d) the absence of speculative attacks on foreign exchange markets; e) the absence of a beggar thy neighbour” dispute at an international level; f) the achievement of price stability; g) the pursuit of a monetary policy rule. Through a literature survey we have seen that different exchange rates have effects on output and employment both in the short and in the long run. However the major conclusion was reached by an extension of recent studies, according to which, even if the central bank strictly controls the inflation rate, the absence of a precise objective in terms of price level makes the exchange rate indeterminate.
|Date of creation:||2002|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Robert J. Barro & David B. Gordon, 1983.
"Rules, Discretion and Reputation in a Model of Monetary Policy,"
NBER Working Papers
1079, National Bureau of Economic Research, Inc.
- Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 101-121.
- Taylor, Mark P, 1988. "A DYMIMIC Model of Forward Foreign Exchange Risk, with Estimates for Three Major Exchange Rates," The Manchester School of Economic & Social Studies, University of Manchester, vol. 56(1), pages 55-68, March.
- 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.
- Bilson, John F O, 1978. "The Current Experience with Floating Exchange Rates: An Appraisal of the Monetary Approach," American Economic Review, American Economic Association, vol. 68(2), pages 392-97, May.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:3086. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.