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Interest Rates, Exchange Rates and World Monetary Policy

  • John E. Floyd

Table of contents

  1. Front Matter
    Pages I-XII
  2. John E. Floyd
    Pages 1-6
  3. A Theoretical Framework

    1. Front Matter
      Pages 8-9
    2. John E. Floyd
      Pages 11-14
    3. John E. Floyd
      Pages 15-39
    4. John E. Floyd
      Pages 41-70
    5. John E. Floyd
      Pages 71-86
    6. John E. Floyd
      Pages 87-94
  4. Exchange Rate Determination

  5. Implications for Monetary Policy

    1. Front Matter
      Pages 266-268
    2. John E. Floyd
      Pages 269-287
    3. John E. Floyd
      Pages 289-306
    4. John E. Floyd
      Pages 307-358
    5. John E. Floyd
      Pages 359-364
  6. Back Matter
    Pages 365-404

About this book

Introduction

A careful basic theoretical and econometric analysis of the factors determining the real exchange rates of Canada, the U.K., Japan, France and Germany with respect to the United States is conducted. The resulting conclusion is that real exchange rates are almost entirely determined by real factors relating to growth and technology such as oil and commodity prices, international allocations of world investment across countries, and underlying terms of trade changes. Unanticipated money supply shocks, calculated in five alternative ways have virtually no effects. A Blanchard-Quah VAR analysis also indicates that the effects of real shocks predominate over monetary shocks by a wide margin. The implications of these facts for the conduct of monetary policy in countries outside the U.S. are then explored leading to the conclusion that all countries, to avoid exchange rate overshooting, have tended to automatically follow the same monetary policy as the United States. The history of world monetary policy is reviewed along with the determination of real exchange rates within the Euro Area.

Keywords

Cross Country Monetary Coordination EU Euro Exchange Rate Overshooting Forward Premium Puzzle Real Exchange Rates Time series World Monetary Policy

Authors and affiliations

  • John E. Floyd
    • 1
  1. 1.Dept. EconomicsUniversity of TorontoTorontoCanada

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-642-10280-6
  • Copyright Information Springer-Verlag Berlin Heidelberg 2010
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Business and Economics
  • Print ISBN 978-3-642-10279-0
  • Online ISBN 978-3-642-10280-6
  • Buy this book on publisher's site