Relative Prices and Floating Exchange Rates-an Empirical Exploration

Hendrik Houthakker

Chapter 15 in The Economics of Relative Prices, 1984, pp 336-351 from Palgrave Macmillan

Abstract: Abstract The question whether changes in relative prices can affect exchange rates would be easy to answer if certain popular theories were valid. According to simple monetarism, for instance, the exchange rate between two currencies depends only on the money supply in the respective countries; the impact of relative price changes can hence be at most indirect, and these changes will contribute nothing to the explanation of actual exchange rates if monetary factors are also taken into account. Similarly, adherents of Purchasing Power Parity (PPP)-who may or may not be simple monetarists-hold that only the general price level, and not relative prices, matter. The Keynesian ‘absorption’ approach, which is not as popular as it once was, attributes central importance to income changes and gives little or no weight to changes in relative prices.

Keywords: Exchange Rate; Price Index; Money Supply; Purchasing Power Parity; Relative Prex (search for similar items in EconPapers)
Date: 1984
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:intecp:978-1-349-06265-2_15

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349062652

DOI: 10.1007/978-1-349-06265-2_15

Access Statistics for this chapter

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