Review of exchange-rate theories in four leading economics textbooks

Jan Priewe
Additional contact information
Jan Priewe: Professor of Economics (emeritus), University of Applied Sciences (HTW), Berlin and Senior Research Fellow, Macroeconomic Policy Institute (IMK), Düsseldorf, Germany

European Journal of Economics and Economic Policies: Intervention, 2017, vol. 14, issue 1, 32-47

Abstract: In this paper, the parts of four leading economics textbooks that deal with exchange-rate theories are reviewed. The books are by Krugman/Obstfeld/Melitz, Blanchard/Johnson, Mankiw/Taylor and Samuelson/Nordhaus. The theoretical background for this exercise is the fact that exchange-rate theory is one of the weakest parts in ‘mainstream economics’, meaning the neoclassical and the New Keynesian stream of thought. It is now widely accepted that exchange-rate forecasts are no better than those arising from a random walk in the short and medium run. For the long run, most authors stick to the old purchasing-power-parity theory whose empirical validation is just as weak. Nonetheless the textbooks reviewed here only present exchange-rate theories that have little empirical support. Yet they differ considerably, even though they remain within the leading theoretical paradigm.

Keywords: teaching economics; open-economy macroeconomics; exchange-rate theory (search for similar items in EconPapers)
JEL-codes: A22 A23 F31 F41 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.elgaronline.com/view/journals/ejeep/14-1/ejeep.2017.01.04.xml (application/pdf)
Restricted access

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:ejeepi:v:14:y:2017:i:1:p32-47

Access Statistics for this article

European Journal of Economics and Economic Policies: Intervention is currently edited by Torsten Niechoj

More articles in European Journal of Economics and Economic Policies: Intervention from Edward Elgar Publishing
Bibliographic data for series maintained by Phillip Thompson ().