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Real Exchange Rate Policy

In: Exchange Rate Policy

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  • Michael Beenstock

Abstract

Despite the range of material covered in the conference as a whole a number of clear policy messages have emerged which have a major bearing upon exchange rate policy in general and UK policy in particular. The main message is that because the exchange market is efficient it cannot be argued that the nominal exchange rate is too high or too low. This is so regardless of the state of monetary policy, North Sea oil and suchlike. If the price of an asset, in this case foreign exchange, reflects all the available information as Frenkel argues, it is by definition at an appropriate level. The same kind of conclusion also follows from Minford’s paper while Britton and Spencer also use a model in which exchange rate expectations are rational and, subject to risk, these expectations are appropriately reflected in the current spot rate.

Suggested Citation

  • Michael Beenstock, 1982. "Real Exchange Rate Policy," Palgrave Macmillan Books, in: Roy A. Batchelor & Geoffrey E. Wood (ed.), Exchange Rate Policy, chapter 7, pages 237-239, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-16863-7_8
    DOI: 10.1007/978-1-349-16863-7_8
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