The exchange rate cannot significantly diverge from a (real) long-term equilibrium level consistent with the macroeconomic picture of an economy for a long period of time; otherwise, the economy suffers from macroeconomic imbalances such as below-potential growth and below natural employment, or...

This paper will discuss problems of the floating exchange rate and consists of two parts. In the first theoretical part, a model of exchange rate in the spirit of monetary approach is described, which was developed mainly in the seventies. The explanation is based on the simple model of the...