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This volume grew out of a National Bureau of Economic Research conference on exchange rates held in Bellagio, Italy, in 1982. In it, the world's most respected international monetary economists discuss three significant new views on the economics of exchange rates - Rudiger Dornbusch's overshooting model, Jacob Frenkel's and Michael Mussa's asset market variants, and Pentti Kouri's current account/portfolio approach. Their papers test these views with evidence from empirical studies and analyze a number of exchange rate policies in use today, including those of the European Monetary System.
"Exchange Rate Theory presents a novel and elegant theory to explain the excessive variability of foreign exchange rate returns. The theory is novel in the sense that it focuses on interaction between market agents as the primary source of the variability in those speculative prices. It is shown that simple interactions between market participants using different information is sufficient to generate deterministic chaos." "In the first part of this book the authors survey existing exchange rate theories and ask whether these theories are useful in explaining actual exchange rate movements. They demonstrate that the 1970s were characterized by the belief that exchange rates could be understood by an analysis of the fundamentals (inflation rates, interest rates and monetary policy). Subsequently, this belief has all but disappeared but researchers have been content to analyze the statistical properties of exchange rates, abandoning the theory and the models." "The second part of the book uses chaos theory to construct an innovative framework for the understanding of exchange markets. These models, which integrate fundamentalism and chartism, create complex exchange rate movements which appear to be random. These models are used to explain several of the anomalies observed in exchange rate markets and to evaluate the possibility of exchange rate prediction."--BOOK JACKET.Title Summary field provided by Blackwell North America, Inc. All Rights Reserved
The exchange rate is a crucial variable linking a nation's domestic economy to the international market. Thus choice of an exchange rate regime is a central component in the economic policy of developing countries and a key factor affecting economic growth. Historically, most developing nations have employed strict exchange rate controls and heavy protection of domestic industry-policies now thought to be at odds with sustainable and desirable rates of economic growth. By contrast, many East Asian nations maintained exchange rate regimes designed to achieve an attractive climate for exports and an "outer-oriented" development strategy. The result has been rapid and consistent economic growth over the past few decades. Changes in Exchange Rates in Rapidly Developing Countries explores the impact of such diverse exchange control regimes in both historical and regional contexts, focusing particular attention on East Asia. This comprehensive, carefully researched volume will surely become a standard reference for scholars and policymakers.
Exchange rate economics is an important field of investigation for academics, professionals and policy-makers. This book provides a comprehensive survey of the theory of and empirical evidence on the determination and effects of exchange rates. The exposition utilizes both diagrammatic and mathematical representations of the underlying models. The book is a comprehensive reference for those engaged in this field of research.
''In summary, the book is valuable as a textbook both at the advanced undergraduate level and at the graduate level. It is also very useful for the economist who wants to be brought up-to-date on theoretical and empirical research on exchange rate behaviour.'' ""Journal of International Economics""
This book collects together the basic documents of an approach to the theory and policy of the balance of payments developed in the 1970s. The approach marked a return to the historical traditions of international monetary theory after some thirty years of departure from them – a departure occasioned by the international collapse of the 1930s, the Keynesian Revolution and a long period of war and post-war reconstruction in which the international monetary system was fragmented by exchange controls, currency inconvertibility and controls over international trade and capital movements.
This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be attained temporarily. This can be achieved by means of higher inflation and/or higher real interest rates, depending on the degree of capital mobility. Evidence for Brazil, Chile, and Colombia supports the model’s prediction that undervalued real exchange rates are associated with higher inflation.
The recent financial crisis has troubled the US, Europe, and beyond, and is indicative of the integrated world in which we live. Today, transactions take place with the use of foreign currencies, and their values affect the nations' economies and their citizens' welfare. Exchange Rates and International Financial Economics provides readers with the historic, theoretical, and practical knowledge of these relative prices among currencies. While much of the previous work on the topic has been simply descriptive or theoretical, Kallianiotis gives a unique and intimate understanding of international exchange rates and their place in an increasingly globalized world.
Volatile exchange rates and how to manage them are a contentious topic whenever economic policymakers gather in international meetings. This book examines the broad parameters of exchange rate policy in light of both high-powered theory and real-world experience. What are the costs and benefits of flexible versus fixed exchange rates? How much of a role should the exchange rate play in monetary policy? Why don't volatile exchange rates destabilize inflation and output? The principal finding of this book is that using monetary policy to fight exchange rate volatility, including through the adoption of a fixed exchange rate regime, leads to greater volatility of employment, output, and inflation. In other words, the "cure" for exchange rate volatility is worse than the disease. This finding is demonstrated in economic models, in historical case studies, and in statistical analysis of the data. The book devotes considerable attention to understanding the reasons why volatile exchange rates do not destabilize inflation and output. The book concludes that many countries would benefit from allowing greater flexibility of their exchange rates in order to target monetary policy at stabilization of their domestic economies. Few, if any, countries would benefit from a move in the opposite direction.
Real Exchange Rates, Devaluation, and Adjustment provides a unified theoretical and empirical investigation of exchange rate policy and performance in scores of developing countries. It develops a theory of equilibrium and disequilibrium real exchange rates, takes up the question of why devaluations are the most controversial policy measures in poorer nations, and discusses what determines their success or failure. In a lucid fashion, Edwards organizes vast amounts of data on exchange rates - both real and nominal - and discusses their effect on net trade balances, net asset positions, output growth, real wages, and rates of price inflation, analyzed both in time series and through cross country comparisons. Edwards's investigation singles out 39 major devaluation episodes for before and after comparative analyses while simultaneously isolating the separate effects of other important explanatory variables, such as bank credit expansion and changes in the terms of trade. The first part of the book focuses on theoretical models of devaluation and real exchange rate behavior in less developed countries. Special attention is paid to intertemporal channels in the transmission of disturbances. The second part uses a large cross country data set to analyze the way the real exchange rate has behaved in these nations. The data are also used to test the implications of several theories of real exchange rate determination. The third part analyzes actual devaluation experiences between 1962 and 1982. These chapters examine the events leading to a balance of payments crisis and to a devaluation, exploring the relation between macroeconomic disequilibrium, and the imposition of trade and exchange controls. They also investigate the effect of nominal devaluation on key variables such as the balance of payments, the current account, the real exchange rate, real output real wages, and income distribution.