 Real Exchange Rates and Macroeconomics: Evidence and TheoryCanadian Journal of Economics, 1997, vol. 30, issue 4, 773-808 Abstract: Since the early 1980s, a large body of research has thrown doubt on the relevance of macroeconomic models for understanding exchange rates. The authors argue that a balanced reading of recent literature in exchange rate economics gives a more optimistic assessment. Many studies have established the pertinence of long-run purchasing power parity (PPP) and the explanatory power of macroeconomic fundamentals in real exchange rate fluctuations. A reasonably strong case can be made for a traditional macroeocnomic interpretation of real exchange rates, which emphasizes short-run price stickiness, but long-run PPP. But a central new ingredient in this interpretation is the presence of international commodity market segmentation and persistent deviations from the 'law of one price.' An example is given of a dynamic general equilibrium model that can reproduce some of the observed features of real exchange rate fluctuations. Date: 1997 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cje:issued:v:30:y:1997:i:4:p:773-808 Ordering information: This journal article can be ordered from Access Statistics for this article Canadian Journal of Economics is currently edited by Zhiqi Chen More articles in Canadian Journal of Economics from Canadian Economics Association Canadian Economics Association Prof. Werrner Antweiler, Treasurer UBC Sauder School of Business 2053 Main Mall Vancouver, BC, V6T 1Z2. Contact information at EDIRC. |
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