Introduction

Imad A. Moosa and Razzaque H. Bhatti
Additional contact information
Imad A. Moosa: La Trobe University
Razzaque H. Bhatti: University of Azad Jammu and Kashmir

Chapter 1 in International Parity Conditions, 1997, pp 1-24 from Palgrave Macmillan

Abstract: Abstract International linkages among markets for goods, capital and foreign exchange play a key role in the process of exchange rate determination. The nature of the equilibrium implied by these linkages and the speed with which this equilibrium is attained have important implications for the ability of governments to pursue independent domestic stabilisation policies. There is little dispute about the proposition that the more integrated the international markets the greater is the prospective difficulty in pursuing independent domestic monetary policies. For example, if financial (capital and foreign exchange) markets around the world are highly integrated, then perfectly mobile cross-border capital flows would force a convergence of the expected real rates of return on identical assets denominated in different currencies. Consequently, currency denomination would become largely irrelevant to borrowing and lending decisions. If this proposition is valid, then domestic monetary policy will have no effect on the expected real rate of interest faced by borrowers and lenders.

Keywords: Exchange Rate; Real Exchange Rate; Real Interest Rate; Purchase Power Parity; Capital Mobility (search for similar items in EconPapers)
Date: 1997
References: Add references at CitEc
Citations:

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:palchp:978-1-349-25523-8_1

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349255238

DOI: 10.1007/978-1-349-25523-8_1

Access Statistics for this chapter

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