Monetary Policy Under Exchange Rate Flexibility / Rudiger Dornbusch.

Format:

Book

Author/Creator:

Dornbusch, Rudiger.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0311.

NBER working paper series no. w0311

Language:

English

Subjects (All):

Foreign exchange--Mathematical models.

Foreign exchange.

International finance.

Monetary policy--Mathematical models.

Monetary policy.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1979.

Cambridge, Massachusetts : National Bureau of Economic Research, 1979.

Summary:

The continuing depreciation of the dollar stands out as one of the big policy issues. It has started to impinge on U.S. monetary policy; it influences the chances for international commercial diplomacy, and it is enhancing the move toward European monetary integration. Above all it leaves most observers with a puzzle as to the causes of the ongoing depreciation. This paper will, of course, not resolve the puzzle. ft rather attempts to layout the basic analytical framework that has been developed for the analysis of exchange-rate questions and to relate it to the question of monetary policy. Part I concentrates on the development of the relevant theoretical framework. The main points to be made here are: (i) exchange rates are primarily deter-mined in asset markets with expectations playing a dominant role; (ii) the sharpest formulation of exchange-rate theory is the "monetary approach, "Chicago's quantity theory of the open economy; (iii) purchasing power parity is a precarious reed on which to hang short-term exchange-rate theory; (iv) the current account has just made it back as a determinant of exchange rates

Notes:

Print version record

1979.