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Post Keynesian versus Neoclassical Explanations of Exchange Rate Movements: A Short Look at the Long Run


  • John Harvey

    () (Department of Economics, Texas Christian University)


In this paper, a series of empirical tests are conducted comparing the explanatory power of the neoclassical approach (in particular, purchasing power parity and the monetary model) with that of a long-run exchange rate model based on Post Keynesian premises (the tests use annual data for the dollar-deutsche mark and the dollar-yen from 1975 through 1998). It is shown that, despite the shift in time horizon and the biasing of the tests in favor of the neoclassical approach, the Post Keynesian approach still shows a much tighter fit to the historical facts.

Suggested Citation

  • John Harvey, 2005. "Post Keynesian versus Neoclassical Explanations of Exchange Rate Movements: A Short Look at the Long Run," Working Papers 200501, Texas Christian University, Department of Economics.
  • Handle: RePEc:tcu:wpaper:200501

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    Cited by:

    1. repec:gei:jnlfer:v:1:y:2016:i:2:p:119-133 is not listed on IDEAS
    2. Alfredo Castillo Polanco & Ted P. Schmidt, 2011. "Exchange Rate Regimes and the Impact of the Global Crisis on Emerging Economies," Chapters,in: Heterodox Analysis of Financial Crisis and Reform, chapter 12 Edward Elgar Publishing.
    3. Joƫlle Leclaire & Tae-Hee Jo & Jane Knodell (ed.), 2011. "Heterodox Analysis of Financial Crisis and Reform," Books, Edward Elgar Publishing, number 13978.

    More about this item


    exchange rates; Post Keynesian; Neoclassical; long run;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange


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