Exchange Rates: Real and Monetary Factors

Douglas Purvis

Working Paper from Economics Department, Queen's University

Abstract: This paper explores several alternative models of the exchange rate which highlight the role of real and monetary factors and the short- and long-run effects of exchange rate changes on real output. The first model focusses on purchasing power parity with flexible prices and a variable real exchange rate. The second model introduces sticky prices and replaces PPP with interest rate parity. The third model introduces multi-sector production and explores the implications of Marshallian dynamics whereby capital stocks adjust slowly. Conclusions about stabilization policy are offered.

Pages: 19
Date: 1982
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:477

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