scholarly journals Can Information Heterogeneity Explain the Exchange Rate Determination Puzzle?

2005 ◽  
Author(s):  
Philippe Bacchetta ◽  
Eric van Wincoop
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Determination ◽  
The Exchange Rate ◽  
Information Heterogeneity

scholarly journals A System Dynamics Model Of Exchange Rate Determination And Forecasting

2020 ◽  
Vol 3 (4) ◽  
pp. 44-55
Author(s):  
Aima Khan
Keyword(s):  
Exchange Rate ◽  
System Dynamics ◽  
Policy Implications ◽  
Nonlinear Feedback ◽  
Exchange Rate Determination ◽  
Past Behavior ◽  
Exchange Rate Movements ◽  
The Exchange Rate ◽  
The Government

Objective: The objective of this paper is to develop a model of exchange rate determination and forecasting to provide reasonable forecasts for the exchange rate to facilitate long-term investments. Design: The study develops the model using the system dynamics method. Grounded on the fundamental theories, the model incorporates nonlinear feedback relationships of interest rate, inflation, per capita income, terms of trade, and oil prices with the exchange rate. Findings: The simulation results indicate the robustness of the model to mimic not only the long term past behavior of the exchange rate but also its ability to provide a reliable long-term forecast for the exchange rate. The model is portable and applies to any oil-exporting country after calibration. Policy Implications: The study has practical implications for individuals, businesses, and the Government because they are all influenced by the exchange rate movements. Specifically, this model provides a useful tool for long term strategic financial planning of oil firms. Originality: The study develops a model for exchange rate accounting for nonlinear feedback relationships among the variables.

scholarly journals Exchange rate determination and the flaws of mainstream monetary theory

2018 ◽  
Vol 38 (1) ◽  
pp. 99-114
Author(s):  
HEINER FLASSBECK
Keyword(s):  
Developing Countries ◽  
Exchange Rate ◽  
Financial Markets ◽  
Exchange Rates ◽  
Monetary Theory ◽  
International Financial Markets ◽  
External Shocks ◽  
Exchange Rate Determination ◽  
Equilibrium Level ◽  
The Exchange Rate

ABSTRACT Developing countries in general need flexibility and a sufficient number of instruments to prevent excessive volatility. Evidence does not support the orthodox belief that, with free floating, international financial markets will perform that role by smoothly adjusting exchange rates to their “equilibrium” level. In reality, exchange rates under a floating regime have proved to be highly unstable, leading to long spells of misalignment. The experience with hard pegs has not been satisfactory either: the exchange rate could not be corrected in cases of external shocks or misalignment. Given this experience, “intermediate” regimes are preferable when there is instability in international financial markets.

scholarly journals The exchange rate in Orthodox, Keynesian and New Developmentalism theoretical models: a literature review

2021 ◽  
Vol 41 (2) ◽  
pp. 220-235
Author(s):  
WILLIAM CAPRIATA ◽  
LEONARDO FLAUZINO DE SOUZA
Keyword(s):  
Exchange Rate ◽  
Literature Review ◽  
Exchange Rates ◽  
Theoretical Models ◽  
Balance Of Payments ◽  
Exchange Rate Determination ◽  
Macroeconomic Models ◽  
The Exchange Rate

ABSTRACT The main purpose of this paper is to present the differences in the exchange rates in macroeconomic models from the three current theoretical views: Orthodox, Post-Keynesian and New Developmentalism. To achieve this objective, it is proposed to make a bibliographic survey of the literature on open macroeconomics and exchange rate. The main differences among these views concerns to exchange rate determination, causes of exchange rate variations and balance of payments equilibrium determination.

scholarly journals Assessing Monetary Model of Exchange Rate Determination: Case of Indonesia

2020 ◽  
Vol 5 (6) ◽  
Author(s):  
Yuniarto Hadiwibowo ◽  
Raynal Yasni
Keyword(s):  
Exchange Rate ◽  
The United States ◽  
Monetary Model ◽  
Exchange Rate Determination ◽  
United States Dollar ◽  
Long Run ◽  
Fiscal Balance ◽  
Short Run ◽  
The Exchange Rate ◽  
Trade Partners

The main purpose of this paper is to assess the exchange rate determination in Indonesia after the Asian financial crisis. We use the Monetary Model to assess the prediction of the Indonesian Rupiah against the United States Dollar and other currencies of the largest trade partners of Indonesia. The models are the Flexible Price Monetary Model and the Sticky Price Monetary Model. We estimate short-run and long-run relationships using the Error Correction Model. The Monetary Model can explain partially the exchange rate variations, but the signs of money, income, and fiscal balance are not as expected. The causality may run from the exchange rate to money and price level.

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