Exchange Rates, Prices and World Trade

Exchange Rates, Prices and World Trade provides a systematic treatment of the interaction between national price levels and exchange rates; the formation of expectations regarding exchange rates; and the effects of real exchange rate changes on trade flows. The thrust is empirical and the book comprises five self-contained chapters with a common theme, the behaviour of prices and quantities in international goods and financial markets. This major contribution distills the key issues addressed in an extremely large literature and presents them in a succinct analytical manner. Specifically, the book contains a thorough survey of the state of the art; a new methodology for the testing of purchasing power parity; a novel approach to the measurement of variations in the structure of relative prices and using the new measures in the ecometric work; a model to link patterns of world trade to variations in relative prices; and the modern sophisticated issues relative to the characteristics of foreign exchange markets. Another important feature is the inclusion of a detailed listing of all data that is used in the empirical work.