Real Adjustment and Exchange-rate Dynamics
This paper presents a model designed to cast some light on the nature of macroeconomic responses to sectoral shocks and to provide a basis for investigation of the interaction between resource allocation and exchange-rate variability. We first develop the implications for the dynamics of the real exchange rate of a Marshallian distinction between short - and long-run supply responses to an endogenous disturbance. Marshall's partial-equilibrium analysis stressed the overshooting of a relative price due to short-run factor fixity ; our analysis derives this result in a general equilibrium context. (However, in the general-equilibrium model it is possible that the long-run price response is perverse so that, rather than overshooting, the short-run relative price response would actually be in the "wrong direction".) We then extend the framework to incorporate the behaviour of money prices in the face of these changing relative prices. The model focusses on monetary equilibrium combined with rational speculation ; the dynamic behaviour of the nominal exchange rate exhibits a straightforward dependence on that of the real exchange rate. But the latter is independent of monetary equilibrium and, in particular, of any speculative behaviour ; any influence of specularors on the nominal exchange rate gives rise to identical movements in the equilibrium nominal price of services.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" 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.
|Date of creation:||1981|
|Date of revision:|
|Contact details of provider:|| Postal: CV4 7AL COVENTRY|
Phone: +44 (0) 2476 523202
Fax: +44 (0) 2476 523032
Web page: http://www2.warwick.ac.uk/fac/soc/economics/
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.:
- Michael Bruno & Jeffrey Sachs, 1982. "Energy and Resource Allocation: A Dynamic Model of the "Dutch Disease"," NBER Working Papers 0852, National Bureau of Economic Research, Inc.
- Bruno, Michael, 1982. " Adjustment and Structural Change under Supply Shocks," Scandinavian Journal of Economics, Wiley Blackwell, vol. 84(2), pages 199-221.
- Michael Bruno & Jeffrey Sachs, 1982. "Energy and Resource Allocation: A Dynamic Model of the "Dutch Disease"," Review of Economic Studies, Oxford University Press, vol. 49(5), pages 845-859.
When requesting a correction, please mention this item's handle: RePEc:wrk:warwec:203. 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: (Margaret Nash)
If references are entirely missing, you can add them using this form.