Controversy: Exchange Rates And Fundamentals  

Oleh:

Dixon, Huw

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Economic Journal (EBSCO) vol. 109 no. 459 (Nov. 1999), page 652-654.
Topik: Exchange rates; fundamental
Fulltext: 652.pdf (58.0KB)

Isi artikel

Are exchange rates ultimately tied down by economic fundamentals, or are they free to drift at random on a sea of speculation? This is of course an interesting question both on the theoretical and the empirical levels. If fundamentals play no empirically signi®cant role in the data, then this is something that needs to be explained and taken into account when writing models. Most theoretical open economy models make strong theoretical assumptions regarding nominal exchange rates: for example purchasing power parity (PPP) holding every instant, that the current and capital accounts must be in equilibrium in the long-run and so on. If these basic theoretical restrictions are found to be absent from the data what is to be done? The papers in this Controversy focus mainly on the empirical aspects of this debate and in particular the mean and variance of nominal exchange rates.

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