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Exchange Rates in Theory and in Reality Michael L. Mussa Essays in International Finance No. 179
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| This essay discusses the relation between theory and reality in the behavior of exchange rates with regard to (1) the random character of exchange-rate fluctuations, (2) the virtues of an asset-pricing model of exchange-rate determination, (3) bubbles and bandwagons in exchange-rate behavior, (4) the empirical relevance of purchasing-power parity, (5) the property of nominal-exchange-regime neutrality, and (6) the U.S. dollar and monetary policy. |
