Originally published in 1982. This book deals with exchange-rate determination and the implications of floating rate regimes for the time paths of prices and quantities. It develops a class of stochastic equilibrium models of the open economy operating under flexible exchange rates, assuming that agents are endowed with rational expectations but do not possess full current information as to the state of the world. Chapters look at a model’s response to economic disturbances, the effect on non-traded goods, and cyclical variations of the terms of trade. The final chapter considers a model to investigate purchasing parity issues.
1. Introduction and Overview 2. Fluctuating Exchange Rates and the International Transmission of Economic Disturbances 3. "Real" and Nominal Exchange Rates in an Uncertain World: The Traded Non-Traded Goods Nexus 4. Cyclical Variations of the Exchange Rate and the Terms of Trade 5. Rational Expectations, Purchasing Power Parity and the Business Cycle
Reissuing works originally published between 1923 and 1997, this collection of books on exchange rate economics is a unique resource in international finance and economic history. Books in the set look at foreign exchange policy, currency and markets in a range of eras and contexts.