Theoretical and Methodological Analysis of the Monetary Approach to the Exchange Rate Modeling
Journal Title: Бізнес Інформ - Year 2015, Vol 1, Issue 0
Abstract
The article is aimed at theoretical and methodological analysis of the monetary approach to the exchange rate modeling. Absence of universal theory (model) of currency exchange rate formation, which would be effective in countries with different economic conditions, has been identified. Approaches that differentiate the classic models of the exchange rate are considered. Expedience of use of the monetary approach to modeling the influence of fundamental macroeconomic factors on the dynamics of the exchange rate has been substantiated. Transmission mechanisms within the framework of the monetary approach have been considered. It has been proven that a transmission mechanism from the monetary momentum, through prices and to the currency exchange rate is perfect and works instantly. The approach of so-called «sticky prices» in the framework of the exchange rate theory has been considered. Causes of occurrence of the time lags in the monetary transmission mechanism have been characterized. Dynamics of exchange rates in accordance with the monetary approach, which is determined by the relative supply and demand of money in the economy, has been considered in terms of long-term perspective. A contemporary vision as to the issue of demand for nominal money balances has been presented. Importance of using the logarithmic form of relationship between currency exchange rate and the factors that predetermine it has been substantiated.
Authors and Affiliations
Roksolana Holub
Keywords
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