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Exchange-Rate Dynamics / Maurice Obstfeld, Alan C. Stockman, National Bureau of Economic Research.
- Format:
- Book
- Author/Creator:
- Obstfeld, Maurice, author.
- Stockman, Alan C., author.
- National Bureau of Economic Research, author.
- Series:
- Working paper series (National Bureau of Economic Research) ; number w1230.
- Working paper series (National Bureau of Economic Research) ; number w1230
- Language:
- English
- Subjects (All):
- Foreign exchange--Mathematical models.
- Foreign exchange.
- Physical Description:
- 1 online resource (88 pages) : illustrations.
- Place of Publication:
- Cambridge, Massachusetts : National Bureau of Economic Research, 1983.
- Summary:
- This paper discusses the dynamic behavior of exchange rates, focusing both on the exchange rate's response to exogenous shocks and the relation between exchange-rate movements and movements in important endogenous variables such as prices, interest rates, output, and the current account. Aspects of exchange-rate dynamics are studied in a variety of models, some of which are based on postulated supply and demand functions for assets and goods, and some of which are based on explicit individual utility-maximizing problems. Section 1 surveys the terrain. Section 2 explores the simplest model in which the relation among the exchange rate, price levels, and the terms of trade can be addressed -- a flexible-price small-country model in which wealth effects are absent and domestic and foreign goods are imperfect substitutes. Section 3 introduces market frictions so that the role of endogenous output fluctuations can be studied. Both sticky-price models and alternative market-friction models are discussed. Section 4 studies the link between the accumulation of foreign assets and domestic capital and the exchange rate. Section 5 examines deterministic and stochastic models in which individual behavior is derived from an explicit intertemporal optimization problem. Finally, section 6 offers concluding remarks.
- Notes:
- Description based on publisher supplied metadata and other sources.
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