In this paper we present a critical overview of differnt methods of constructing an equilibrium exchange rate. The recent literature on purchasing power parity (PPP) indicates that on its own PPP is not a good vehicle for defining an equilibrium exchange rate. Rather, we argue that the latter...

Recent theoretical developments in exchange rate economics have led to important new insights into the functioning of the foreign exchange market. The simple models of the 1970s, which could not withstand empirical evaluation, have been succeeded by more complex models that draw on theoretical...

The globalization of capital and product markets has many implications for economic welfare. Countries can specialize in the production of goods for which they have comparative advantages, and capital is allocated more efficiently. However, one potentially adverse effect of globalization is the...