This chapter is structured in three parts. The first part outlines the methodological steps, involving both theoretical and empirical work, for assessing whether an observed allocation of resources across countries is efficient. The second part applies the methodology to the long-run allocation...

This chapter surveys recent theoretical and empirical contributions on foreign exchange rate determination. The chapter first examines monetary models under uncovered interest parity and rational expectations, and then considers deviations from UIP/rational expectations: foreign exchange risk...