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Forward exchange, short term capital flows and monetary policy: A comment

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Summary

In this comment it is argued that the theoretical explanation of Coulbois and Prissert of the functioning of the forward exchange market (the ‘cambist’ theory) is nothing but a simplified version of the interest parity theory, because in their theory the horizontal arbitrage function implicitly plays a dominant role.

Further some critical remarks are made concerning the role of non-bank arbitrages and the influence of interest arbitrage on the spot rate, on the size of the international short-term capital movements and on the domestic money supply.

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Authors and Affiliations

  1. International Economic Relations at the Economic Faculty of the Free University of Amsterdam, Netherlands

    Bernard J. Schep & Willem J. B. Smits

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  1. Bernard J. Schep
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  2. Willem J. B. Smits
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Additional information

They want to thank Mr. William Schep for his helpful comments with regard to the translation into English of the original text.

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Schep, B.J., Smits, W.J.B. Forward exchange, short term capital flows and monetary policy: A comment. De Economist 124, 475–489 (1976). https://doi.org/10.1007/BF01675921

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  • DOI: https://doi.org/10.1007/BF01675921

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