Comment on P. J. K. Kouri, “The Exchange Rate and the Balance of Payments in The Short Run and in The Long Run: A Monetary Approach”
The requirements of asset-market equilibrium play a crucial role in determining the exchange rate. Changes in relative asset supplies and in the terms at which the public is willing to hold them—and these terms depend crucially on expectations—are therefore to be focused on in any analysis of exchange- rate variations in both the short and long run.
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