The Economics of Exchange Rates

The Economics of Exchange Rates

The Economics of Exchange Rates

The Economics of Exchange Rates

Synopsis

This book is a survey of exchange-rate economics. Using the latest econometric techniques, it covers the main theories that explain the determination of exchange rates and utilizes recent empirical data on exchange rate behavior.

Excerpt

The economics of exchange rates is an area within international finance which has generated and continues to generate strong excitement and interest among students, academics, policymakers and practitioners. The last fifteen years or so in particular have seen a great flurry of activity in exchange rate economics, with important contributions to exchange rate theory, empirics and policy. Much of this activity has been so revolutionary as to induce a significant change in the profession's way of thinking about the area. In this book – part monograph, part advanced textbook – we seek to provide an overview of the exchange rate literature, focusing largely but not exclusively on work produced within the last fifteen years or so, expositing, criticising and interpreting those areas which, in our view, are representative of the most influential contributions made by the profession in this context. Our overall aim is to assess where we stand in the continuing learning and discovery process as exchange rate economists. In doing so, we hope to provide a framework which will be useful to the economics and financial community as a whole for thinking about exchange rate issues. The monograph is intended to be wide-ranging and we have attempted to make chapters easy to follow and largely self-contained.

The primary target for the book is students taking advanced courses in international economics or international finance at about the level of a second-year US doctoral programme in economics or finance, although students at other levels, including master's degree students and advanced undergraduates, should also find the book accessible. The book should also prove useful to our professional colleagues, including researchers in international finance in universities and elsewhere, and specialists in other areas requiring an up-to-date overview of exchange rate economics. Last, but by no means least, we very much hope that the book will be of interest and use to financial market practitioners.

The intellectual history behind this monograph is long and tortuous. At one level it began while Mark Taylor, freshly graduated from Oxford in philosophy and economics, was working as a junior foreign exchange dealer in the City of London whilst simultaneously pursuing graduate studies part-time at London University in the early 1980s. At another level, it began while he was a senior economist at the International Monetary Fund (IMF) during the first half of the 1990s,inthat his survey article on exchange rate economics, largely prepared at the IMF and published in the Journal of Economic Literature in 1995, initially . . .

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