A Monetary (Asset) Approach to Exchange Rate Determination: The Evidence since 1973
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A Monetary (Asset) Approach to Exchange Rate Determination: The Evidence since 1973
Credit and Capital Markets – Kredit und Kapital, Vol. 14 (1981), Iss. 3 : pp. 341–349
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Baade, Robert A.
References
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Abstract
A Monetary (Asset) Approach to Exchange Rate Determination: The Evidence Since 1973
Virtually every economist agrees that monetary factors affect the dollar price of world currencies. No such unanimity of opinion exists, however, when the question of degree is entertained. The adoption of a freer-floating exchange rate regime in 1973, however, provides an opportunity to analyze the degree to which monetary events influence dollar currency prices. While evidence gathered for the 1973 - 79 period does not confirm unequivocally a monetary or asset approach to exchange rate determination, it does suggest an important monetary role. Furthermore, the 1977-79 period offers more support for the asset approach than the 1973 - 76 period. This may reflect the fact that the world monetary system has settled back into a pattern after disruptions due to the significant oil price hikes in 1973-74 and after the commitment was made to a freer-floating exchange rate system in 1973.