Country preferences,currency values and policy issues |
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Institution: | 1. College of Business and Public Management, Wenzhou-Kean University, China;2. College of Business, University of Akron, USA |
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Abstract: | The paper sketches an approach to exchange rate modeling that links currency values to the prospective income streams associated with claims on physical capital in different countries. This framework represents an alternative to general equilibrium models in which asset preferences are derived essentially from the use of different transactions currencies in different countries. The new framework provides perspectives on: the safe-haven phenomenon; the role for monetary policy and the debate over fixed versus flexible exchange rates; the effectiveness of exchange market intervention; and the dual nature of policies toward capital flows and policies toward tradable goods industries. |
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