Are exchange rates macroeconomic phenomena?

Andrew Rose

Economic Review, 1994, 19-30

Abstract: This paper argues that macroeconomic variables are relatively unimportant determinants of exchange rates. The argument hinges on the fact that bilateral exchange rate volatility differs widely across pairs of countries, but macroeconomic volatility is much more similar across countries, at least at short- and medium-term frequencies. For instance, the French Franc/German Deutschemark exchange rate has dramatically lower volatility than the Canadian dollar/German Deutschemark rate, although France and Canada have approximately equal macroeconomic volatility vis-a-vis Germany.

Keywords: Foreign; exchange; rates (search for similar items in EconPapers)
Date: 1994
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