Chapter

The Natural Real Exchange Rate of the United States Dollar, and Determinants of Capital Flows

Jerome L. Stein

in Fundamental Determinants of Exchange Rates

Published in print April 1998 | ISBN: 9780198293064
Published online November 2003 | e-ISBN: 9780191596940 | DOI: http://dx.doi.org/10.1093/0198293062.003.0002
 The Natural Real Exchange Rate of the United States Dollar, and Determinants of Capital Flows

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To what extent has the real exchange rate of the US dollar been as stable as is justified by the ”fundamentals” – fiscal policy, private saving ratio, productivity, rate of return on investment, real long‐term rate of interest? What factors can explain the persistent and large deviations from purchasing power parity? How can we calculate whether the US dollar is over or undervalued? What has produced the US current account deficits? How do international financial markets affect the responses of the US economy to internal and external disturbances?

Keywords: capital mobility; fiscal policy; international financial markets; purchasing power parity; Real exchange rate of the US dollar; real long‐term rate of interest; return on investment; US budget deficits; US current account deficits; US NATREX

Chapter.  18436 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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