This paper replies to Ahking’s (1990) re-examination of Taylor and McMahon’s (1988) analysis of long-run purchasing power parity in the 1920s. We demonstrate that Ahking’s conclusions are only partially correct and reestablish our conclusion that, a form of long-run purchasing-power parity...

We survey the literature on the two main views of exchange rate determination that have evolved since the early 1970s: the monetary approach to the exchange rate (in flex-price, sticky-price and real interest differential formulations) and the portfolio balance approach. We then go on to discuss...

This paper deals with hysteresis in the desired equilibrium exchange rate (DEER) arising from misalignment. When the actual real exchange rate departs from its DEER value, current account realizations--and consequently, debt service obligations--will differ from those assumed in the initial DEER...

In this paper we provide evidence for Evans and Lyons' (2005b) model of an information aggregation process in FX markets using a German bank's end-user order flow from 2002 to 2003. Though customer order flow is unambiguously the vehicle incorporating non-public information into exchange rates...