Exchange-Rate Management and Policy

Graham Bird

Chapter 7 in International Macroeconomics, 1998, pp 97-114 from Palgrave Macmillan

Abstract: Abstract In the previous chapter we focused on the analysis of monetary and fiscal policy. Exchange-rate variations came in to the analysis as a fairly passive response to payments disequilibria. In this chapter we concentrate more exclusively on the effects of changing the exchange rate. This will involve discussing the so-called elasticities approach to the balance of payments. This approach contrasts with the open-economy model introduced in Chapter 2 since, whereas that model essentially examines the implications of changes in income with prices held constant, the elasticities approach examines what happens when prices change and income is held constant. The chapter also examines devaluation within the context of the absorption approach which stresses the importance of income as opposed to prices.

Keywords: Exchange Rate; Current Account; Real Exchange Rate; Price Elasticity; Exchange Rate Change (search for similar items in EconPapers)
Date: 1998
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DOI: 10.1057/9780230372290_7

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