Exchange Rates and Fundamentals: A Microeconomic Approach

Imad A. Moosa ()
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Imad A. Moosa: Department of Accounting and Finance, Monash University, Postal: PO Box 197 Caulfield East 3145 Victoria, Australia, http://www.monash.edu.au

Economia Internazionale / International Economics, 2002, vol. 55, issue 4, 551-571

Abstract: A microeconomic view of exchange rate determination is used to explain exchange rate behaviour, particularly volatility. The pitfalls of trying to represent the exchange rate determination process by a simple model are exposed. It is shown that fundamentals are important for, and relevant to, exchange rate determination even though fundamental models have performed poorly. It is also shown that speculation does not necessarily preclude any role for fundamentals. Finally, it is demonstrated that fundamentals are important even in the short run and when there are bubbles.

JEL-codes: F31 G15 (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ecoint:0177

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