http://worldcat.org/entity/work/id/143263681

Some evidence on exchange rate determination in major industrial countries

The concept of exchange rate misalignment is a somewhat problematic one reflecting our imperfect knowledge of exchange market behavior. Although there have been some episodes when foreign exchange markets have exhibited trends that are widely seen as incompatible with economic fundamentals, nevertheless, at any point in time, it is difficult to know what explains exchange rate movements and whether a perceived "misalignment" is the result of a "market failure", or a "model failure", or a "policy failure." This is essentially the dilemma facing the policymaker in deciding what, if any, action to take in response to exchange rate movements. It is imperative, therefore, that a satisfactory approach to modeling exchange rate movements which can be supported by empirical evidence be developed to aid our understanding of exchange rate movements, and the formulation of suitable policy responses.

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