Handbook of Critical Issues in Finance
Show Less

Handbook of Critical Issues in Finance

Edited by Jan Toporowski and Jo Michell

This vital new Handbook is an authoritative volume presenting key issues in finance that have been widely discussed in the financial markets but have been neglected in textbooks and the usual compilations of conventional academic wisdom.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 12: The exchange rate

Annina Kaltenbrunner


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.

Further information

or login to access all content.