Impact of inflation shocks on foreign exchange rates reflects central bank stature

Jonathan Davis and Pon Sagnanert
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Pon Sagnanert: https://dallasfed.frswebservices.org/banking/rs/sagnanert

Dallas Fed Economics from Federal Reserve Bank of Dallas

Abstract: The purchasing power parity theory of exchange rates is easily understood: A basket of goods should have the same price in different markets when that price is expressed in a common currency. However, the relationship between market-determined exchange rates and inflation shocks is not always straightforward. In the short run, central bank transparency can become an important determinant.

Keywords: exchange rates; international economics; inflation; monetary policy (search for similar items in EconPapers)
Date: 2024-09-03
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Persistent link: https://EconPapers.repec.org/RePEc:fip:d00001:98757

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