Cover of: Fundamental Determinants of Exchange Rates | Jerome L. Stein

Fundamental Determinants of Exchange Rates

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Oxford University Press, USA
The Physical Object
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Open LibraryOL7399071M
ISBN 100198287992
ISBN 139780198287995

It provides an elegant model based on a solid theoretical foundation that links real exchange rates to their fundamental economic determinants and takes proper account of Cited by: Kindle Fire HDX '' Kindle Fire HD ".

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This item has a maximum order quantity cturer: Clarendon Press. This book greatly enhances our understanding of the behavior of real exchange rates. It provides an elegant model based on a solid theoretical foundation that links Fundamental Determinants of Exchange Rates book exchange rates to their fundamental economic determinants and.

NATREX is the acronym for NATural Real EXchange, referring to a medium‐run, inter‐cyclical equilibrium real exchange rate, determined by real, fundamental factors. Importantly, the NATREX is a moving equilibrium real exchange rate, responding to continual changes in exogenous and endogenous real : Jerome L.

Stein. Yet it is also neo-classical in its stress upon the accepted fundamentals driving a real economy. It concentrates on the real exchange rate, and explains medium- tolong-run movements in equilibrium real exchangerates in terms of fundamental variables: the productivity of capital and social (public plus private) thrift at home and abroad.5/5(1).

"This book greatly enhances our understanding of the behavior of real exchange rates. It provides an elegant model based on a solid theoretical foundation that links real exchange rates to their fundamental economic determinants and takes proper account of stock and flow considerations. The authors provide a masterful account of how changes in.

It concentrates on the real exchange rate, and explains medium- tolong-run movements in equilibrium real exchange rates in terms of fundamental variables: the productivity of capital and social (public plus private) thrift at home and abroad.

Yet it is also neo-classical in its stress upon the accepted fundamentals driving a real economy. It concentrates on the real exchange rate, and explains medium- tolong-run movements in equilibrium real exchange rates in terms of fundamental variables: the productivity of capital and social (public plus private) thrift at home and abroad.

Hence they are the most followed, analyzed and often manipulated by government. Thus many factors act as foreign exchange rate determinants. To better understand the 5 determinants of foreign exchange rates let us see how trade associations between countries are affected due to changes in the exchange rates.

Exchange Rates and Fundamentals Charles Engel, Kenneth D. West. NBER Working Paper No. Issued in August NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics, Asset Pricing We show analytically that in a rational expectations present value model, an asset price manifests near random walk behavior if fundamentals Cited by: The economic and policy implications of the NATREX approach --The Natural Real Exchange Rate of the United States dollar, and determinants of capital flows --The dynamics of the Real Exchange Rate and current account in a small open economy: Australia --The Natural Real Exchange Rate between the French Franc and the Deutschmark: implications for monetary union --The equilibrium real exchange rate.

Once the government an- nounces the value of the money supply, mar- ket participants buy or sell currencies as long as the news is different from what they ex- pected.

Thus, news about fundamentals, un- der this view, is an important determinant of the exchange Size: 85KB. The Natural Real Exchange Rate of the United States Dollar, and Determinants of Capital Flows; 3.

The Dynamics of the Real Exchange Rate and Current Account in a Small Open Economy: Australia; 4. The Natural Real Exchange Rate between the French Franc and the Deutschmark: Implications for Monetary Union; 5.

predict fundamentals with the well-established failure of fundamentals to predict exchange rate changes. We show that under some empirically plausible conditions, sample sizes are too small to allow reliable use of fundamentals to predict changes in exchange rates, even when these fundamentals determine the exchange rate.

Fundamental determinants of the long run real exchange rate: The case of Norway Abstract: Modelling the Norwegian exchange rate against a basket of currencies, we find a robust long-term link between the real exchange rate and real interest differential that is consistent with purchasing power parity (PPP) and uncovered interest parity (UIP).

This exchange rate concept is denoted as “fundamental” in that it abstracts from short-term factors and emphasizes instead determinants that are important over the medium term.

An assessment of a country’s exchange rate can be made by comparing its current level with the calculated FEERCited by:   "This book greatly enhances our understanding of the behavior of real exchange rates.

It provides an elegant model based on a solid theoretical foundation that links real exchange rates to their fundamental economic determinants and takes proper account of stock and flow considerations.

declining nominal-exchange-rate value of its currency). A country with a relatively low inflation rate will have an appreciating currency (an increasing nominal-exchange-rate value of its currency). The rate of appreciation or depreciation will be approximately equal to the percentage-point difference in the inflation rates.

Fundamental determinants of the real exchange rate of the Indian rupee: Long run equilibrium and short term behavior 1. Introduction An economy is linked to the world economy through two broad channels: trade and finance. India’s economic policy reforms of sought to globalise the hitherto relativelyFile Size: KB.

ditional exchange rate models are not able to explain such a large and rapid adjustment. From a monetary Chart 1 The Recent Appreciation of the Canadian Dollar Nominal exchange rate (US$ per Can$, monthly average) What Drives Movements in Exchange Rates.

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The Fundamental Determinants of the Real Exchange Rate of the U.S. Dollar Relative to Other G-7 Currencies IMF Working Paper No. 95/81 46 Pages Posted: 15 Feb Cited by: 5. EXCHANGE RATES: CONCEPTS, MEASUREMENTS AND ASSESSMENT OF COMPETITIVENESS Bangkok Novem Rajan Govil, Consultant.

This activity is supported by a grant from Japan. BANGKOK, THAILAND. NOVEMBER 24 –. Fiscal considerations become fundamental determinants of the decision of different foreign exchange regime.

‘In the long run, in contrast, exchange rate movements are driven by the “fundamental,” leading to a relationship between interest rates and exchange rates that are more consistent with UIP [Uncovered interest parity]’ [6]. What. Read the full-text online edition of The Economics of Exchange Rates ().

This book is a survey of exchange-rate economics. Using the latest econometric techniques, it covers the main theories that explain the determination of exchange rates and utilizes recent empirical data on exchange rate behavior.

Fundamental Determinants of. The fundamental determinants considered are productivity differences, government expenditure, foreign institutional investment, openness of the economy, interest rate differentials, inflation differentials, terms of trade, foreign exchange reserves and net foreign : Mita Suthar.

The purpose of this paper is to highlight the main determinants of the exchange rate from a monetary perspective.

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When the exchange rate is officially fixed, essentially the same monetary influences that determine the exchange rate affect the level of official settlements corresponding to the balance of payments surplus or : Anthony Makin.

Constructing a synthetic euro-dollar exchange rate over a period from to and applying cointegration approaches, four factors are identified as fundamental determinants of. The aim of this paper is to review and examine a collection of ‘most commonly applied’ theoretical and empirical models of equilibrium exchange rate.

The presentation on each model starts with an introduction of core theoretical frameworks. It will then be followed by discussions on relevant empirical steps to estimate the equilibrium rate.

Testing for the Fundamental Determinants of the Long-Run Real Exchange Rate: The Case of Taiwan Hsiu-Ling Wu. NBER Working Paper No. Issued in October Three things have been suggested in this paper regarding the real exchange rate movements of the Taiwanese dollar with respect to the US dollar.

Concerning exchange rate forecasting, technical analysis extrapolates from past exchange-rate trends while ignoring economic and political determinants of exchange rates.

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True According to the Keynesian income-adjustment mechanism, income differentials among nations guarantee current-account equilibrium in a world of fixed exchange rates. Therefore, the exchange rate between dollar and pound at the maximum can be £ 1 = $ This exchange rate signifies U.S.

gold export point or upper specie point. Similarly, the exchange rate of pound could not fall below $ dollars, in case the United States had a BOP surplus resulting in flow of gold from Britain to that country.of the real exchange rate following shocks to those determinants, using quarterly South African data covering the period to It begins with a review of literature on the determinants of the real exchange rate and provides an updated background on the exchange rate system in South Africa.

An empirical model linking.on ‘The Economics of Exchange Rates’, which provides a comprehensive review of the post-war literature on the subject until the early s, may be seen as useful groundwork preliminary to the study of this book, although readers with a good general background in economics should be able to tackle the book head Size: 39KB.