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A Structural Model of Exchange Rate Dynamics

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  • Kuzmin, Anton

Abstract

The concept of formation of the equilibrium exchange rate on the conversion market was developed, taking into account foreign trade, capital flows and other components of the balance of payments. As the main determinants of theoretical-structural model of the dynamics of the exchange rate equal countries are used, in the terms of trade, capital mobility, cumulative releases, internal and external prices. The result is a new final structural dependence of the dynamics of the exchange rate on the key macroeconomic determinants. The results obtained are applied to the study of the concept of purchasing power parity that allowed to justify theoretically - from positions of macroeconomic approach - a fundamental mismatch between the value of the exchange rates and the theory of purchasing power parity.

Suggested Citation

  • Kuzmin, Anton, 1971. "A Structural Model of Exchange Rate Dynamics," MPRA Paper 64614, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:64614
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    References listed on IDEAS

    as
    1. Charles Engel & Nelson C. Mark & Kenneth D. West, 2008. "Exchange Rate Models Are Not as Bad as You Think," NBER Chapters, in: NBER Macroeconomics Annual 2007, Volume 22, pages 381-441, National Bureau of Economic Research, Inc.
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    6. Mr. Leonardo Bartolini, 1993. "Devaluation and Competitiveness in a Small Open Economy: Ireland 1987-1993," IMF Working Papers 1993/082, International Monetary Fund.
    7. Goodwin, Barry K. & Grennes, Thomas & Wohlgenant, Michael K., 1990. "Testing the law of one price when trade takes time," Journal of International Money and Finance, Elsevier, vol. 9(1), pages 21-40, March.
    8. Mr. Francesco Caramazza, 1993. "French-German Interest Rate Differentials and Time-Varying Realignment Risk," IMF Working Papers 1993/001, International Monetary Fund.
    9. Frenkel, Jacob A., 1978. "Purchasing power parity : Doctrinal perspective and evidence from the 1920s," Journal of International Economics, Elsevier, vol. 8(2), pages 169-191, May.
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    11. Bahmani-Oskooee, Mohsen & Goswami, Gour Gobinda, 2004. "Exchange rate sensitivity of Japan's bilateral trade flows," Japan and the World Economy, Elsevier, vol. 16(1), pages 1-15, January.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    exchange rate; modeling; balance of payments; trading conditions; purchasing power parity;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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