A theory of current account and exchange rate determinations

Joshua Aizenman

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

The purpose of this paper is to construct a two-period, two-country model that derives the current account, the exchange rate, the terms of trade, and real interest rates from optimal behavior principles. This is done by constructing a model that uses money mainly as a means of exchange, where the technology of exchange is flexible due to potential substitutability of time and real balances as a means of coordinating transactions. The discussion results in a framework that integrates elements of net saving theories and the monetary approach into a unified structure, in which the two approaches are complementary viewpoints.

Original languageEnglish
Pages (from-to)261-280
Number of pages20
JournalEuropean Economic Review
Volume23
Issue number3
DOIs
StatePublished - 1 Jan 1983
Externally publishedYes

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