The seminal contributors to the monetary approach to the balance of payments suggested that the approach could be applied to a flexible exchange rate regime with only minor modifications. A number of characteristics of recent exchange rate behavior, however, are in conflict with the traditional...

This paper examines the empirical validity of a simple monetary model of exchange rate determination. The model stresses that the exchange rate, which is the relative price of two monies, is determined by the relative supplies of, and demands for, the two monies, rather than by the condition for...

Proponents of the vicious circle hypothesis argue that exchange rate depreciation is an independent source of inflationary pressure and an ineffective tool of adjustment policy. In this paper, a general equilibrium model of a small open economy is constructed that reproduces the pattern of...