Basic Exchange Rate Theories

Charles Marrewijk

No 05-024/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This four-chapter overview of basic exchange rate theories discusses (i) the elasticity and absorption approach, (ii) the (long-run) implications of the monetary approach, (iii) the short-run effects of monetary and fiscal policy under various economic conditions, and (iv) the transition from short-run to long-run in a sticky-price model with rational expectations. We provide ample anecdotal, historical, and heuristic information on the goodness-of-fit of the various exchange rate models based on simple graphs, statistics, and tests. Details are provided in technical notes.

Keywords: exchange rates; expectations; monetary approach; elasticity; absorption; overshooting; monetary policy; fiscal policy (search for similar items in EconPapers)
JEL-codes: E F G (search for similar items in EconPapers)
Date: 2005-02-23
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Citations: View citations in EconPapers (2)

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Working Paper: Basic Exchange Rate Theories (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20050024

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