As we have seen, international monetarists argue that the exchange rate is irrelevant in determining the direction of the real economy and affects only monetary phenomena, such as the level of prices. This view was put to a practical test from 1977 to the time of writing (October 1980), when sterling was permitted, if not encouraged, to appreciate almost continuously as a result of the saving to the balance of payments from North Sea oil and of the massive inflow of foreign capital in 1977 and again in 1979–80 to take advantage of high interest rates.
KeywordsExchange Rate World Trade Real Exchange Rate Real Wage Trading Performance
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Notes and References
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