Rational expectations and monetary models of exchange rate determination

1983 ◽  
Vol 11 (2) ◽  
pp. 247-260 ◽  
Author(s):  
Dennis L. Hoffman ◽  
Don E. Schlagenhauf
Keyword(s):  
Exchange Rate ◽  
Rational Expectations ◽  
Exchange Rate Determination ◽  
Monetary Models

scholarly journals Application of Monetary Models of Exchange Rate Determination for Poland

2008 ◽  
Vol 3 (2) ◽  
pp. 19-24 ◽  
Author(s):  
Yu Hsing
Keyword(s):  
Exchange Rate ◽  
Inflation Rate ◽  
Mean Squared Error ◽  
Nominal Exchange Rate ◽  
Exchange Rate Determination ◽  
Mean Absolute Percent Error ◽  
Expected Inflation ◽  
Squared Error ◽  
Monetary Models ◽  
Absolute Percent Error

Application of Monetary Models of Exchange Rate Determination for PolandThe zloty/USD exchange rate is examined based on the Dornbusch model, the Bilson model, the Frenkel model, and the Frankel model. Empirical results show that the coefficient of the relative money supply is positive and significant, that the coefficient of the relative output is negative and significant, and that the Bilson model or the Frenkel model applies to Poland. Hence, the nominal exchange rate is positively affected by the relative interest rate and the relative expected inflation rate. The Balassa-Samuelson effect is confirmed in both models. The Bilson model has a smaller root mean squared error or mean absolute percent error than the Frenkel model.

scholarly journals ANALISIS MODEL MONETER HARGA FLEKSIBEL DALAM PENENTUAN NILAI TUKAR RUPIAH

2007 ◽  
Vol 8 (2) ◽  
pp. 193
Author(s):  
Endri Endri
Keyword(s):  
Exchange Rate ◽  
Money Demand ◽  
Demand Function ◽  
Actual Behavior ◽  
Monetary Model ◽  
Money Demand Function ◽  
Exchange Rate Determination ◽  
Expected Inflation ◽  
Goods Market ◽  
Monetary Models

There are a wide variety of monetary models of exchange rate determination, all of which are outgrowth and extension of the basic flexible-price version pioneered by Frenkel (1978) and Bilson (1978). The research aims to know and prove by empiri-cal means the flexible price monetary model is relevant and advantageous to explain the fluctuation of exchange rate rupiah. The methodology involves testing first two assumption of the monetary model, namely, the price arbitrage (unified goods market) and the existence of a stable money demand function. Having these assumption held, the estimation of fluctuation in exchange rate in 1997-2005 was estimated using the flexible price monetary model developed for this purpose. Estimation of fluctuation in exchange rate suggest that the actual behavior of exchange rate in the period 1997 – 2005 is highly consistent with prediction of the flexible price monetary model. Fluctuation in exchange rate of Indonesia was largely explained by such variables as domestic money demand, domestic income and expected inflation, consistent with hypothesis of the flexible price monetary model.

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