Edited by Jan Toporowski and Jo Michell
Chapter 12: The exchange rate
Few topics of investigation have occupied mainstream economic theory as much as the attempt to understand, explain or even forecast exchange rate movements. As such, exchange rate theory has evolved in interdependence with a changing international economic environment and shifting paradigms in economic theory. This, however, changed nothing of the neoclassical view of the exchange rate as a market equilibrating price, which stands in a causal and permanent relationship with underlying ‘fundamentals’ and remains firmly embedded in the classical dichotomy. This is also true for the Marxist approach of the real exchange rate based on the principle of absolute cost advantage. The important structural component of international monetary relations is highlighted in Marx’s concept of ‘world money’. Post-Keynesian approaches in contrast – in line with their view of economies as essential monetary economies – stress the role of the exchange rate as an asset class per se and the driving role of expectations in short-term financial markets, both in the short and the long run.
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.