Theories, Consistent Expectations and Exchange Rate Dynamics

Michael Goldberg and Roman Frydman
Additional contact information
Michael Goldberg: New York University
Roman Frydman: University of New Hampshire

Chapter 20 in Open-Economy Macroeconomics, 1993, pp 377-399 from Palgrave Macmillan

Abstract: Abstract It has been apparent for some time now that the standard asset market models of exchange rate determination provide poor descriptions of exchange rate behaviour. These models are usually solved using the rational expectations hypothesis (REH) and it seems natural to inquire whether the problem lies in part with the expectational assumption. Studies that undertake this line of analysis in the exchange rate literature include Frankel and Froot (1987) and Kirman (1990). In this chapter we pursue this line of research and explore the implications of an alternative expectational assumption, recently proposed in Frydman and Phelps (1990) called the theories consistent expectations hypothesis (TCEH). We show that using the TCEH to close the monetary models of the exchange rate brings their implications more closely in line with the empirical record.

Keywords: Exchange Rate; Real Exchange Rate; Real Interest Rate; Purchase Power Parity; Monetary Model (search for similar items in EconPapers)
Date: 1993
References: Add references at CitEc
Citations: View citations in EconPapers (8)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:pal:intecp:978-1-349-12884-6_20

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349128846

DOI: 10.1007/978-1-349-12884-6_20

Access Statistics for this chapter

More chapters in International Economic Association Series from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().