A Monetary Approach To The Exchange Rate: Doctrinal Aspects And Empirical Evidence

Jacob A. Frenkel
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Jacob A. Frenkel: University of Chicago

A chapter in Flexible Exchange Rates and Stabilization Policy, 1977, pp 68-92 from Palgrave Macmillan

Abstract: Abstract This paper deals with the determinants of the exchange rate and develops a monetary view (or more generally, an asset view) of exchange rate determination. The first part traces some of the doctrinal origins of approaches to the analysis of equilibrium exchange rates. The second part examines some of the empirical hypotheses of the monetary approach as well as some features of the efficiency of the foreign exchange markets. Special emphasis is given to the role of expectations in exchange rate determination and a direct observable measure of expectations is proposed. The direct measure of expectations builds on the information that is contained in data from the forward market for foreign exchange. The empirical results are shown to be consistent with the hypotheses of the monetary approach.

Keywords: Exchange Rate; Foreign Exchange; Money Supply; Purchase Power Parity; Foreign Exchange Market (search for similar items in EconPapers)
Date: 1977
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-03359-1_7

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DOI: 10.1007/978-1-349-03359-1_7

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