Basic Exchange Rate Theories

Charles van Marrewijk
2005 Social Science Research Network  
This four-chapter overview of basic exchange rate theories discusses (i) the elasticity and absorption approach, (ii) the (long-run) implications of the monetary approach, (iii) the short-run effects of monetary and fiscal policy under various economic conditions, and (iv) the transition from short-run to long-run in a sticky-price model with rational expectations. We provide ample anecdotal, historical, and heuristic information on the goodness-of -fit of the various exchange rate models based
more » ... on simple graphs, statistics, and tests. Details are provided in technical notes.
doi:10.2139/ssrn.680403 fatcat:ftwrgia3ljaj7ky77fjvmnjswu