Factors determining exchange rates: the roles of relative price levels, balances of payments, interest rates and risk

Peter Isard
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Peter Isard: International Monetary Fund (IMF) - Research Department

No 4, BIS Working Papers from Bank for International Settlements

Abstract: 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.

Pages: 48 pages
Date: 1980-09
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Citations: View citations in EconPapers (10)

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