The Real Exchange Rate Always Floats

Thorvaldur Gylfason

Australian Economic Papers, 2002, vol. 41, issue 4, 369-381

Abstract: This paper makes two main points. First, irrespective of nominal exchange rate arrangements, the real exchange rate always floats — if not through nominal exchange rate adjustment, then through price change. Further, because prices and wages tend to be sticky, the adjustment of real exchange rates towards long–run equilibrium takes time, as witnessed by long–lasting currency misalignments around the world. In second place, real exchange rates are rather likely to fluctuate on their way towards long–run equilibrium because of the dynamic interaction between real exchange rates and the current account or, put differently, because the structure of lags with which exchange rates impact the volume of exports and imports may give rise to oscillatory behaviour.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://doi.org/10.1111/1467-8454.00171

Related works:
Working Paper: The Real Exchange Rate Always Floats (2002)
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:bla:ausecp:v:41:y:2002:i:4:p:369-381

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0004-900X

Access Statistics for this article

Australian Economic Papers is currently edited by Daniel Leonard

More articles in Australian Economic Papers from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().