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The Relation Between the Current Account and the Exchange Rate: a Survey of the Recent Literature

Chapter

Abstract

The subject of this paper is the recent literature on the relationship between changes in a country’s exchange rate and changes in its current account balance. Given the nature of the workshop and my belief in the advantages of specialization, I have limited the survey to the literature dealing with theoretical aspects and direct empirical tests of the relationship. Thus I have not covered the literature on macroeconomic modelling, and there are only brief references to recent work in such areas as the estimation of import/export demand elasticities. My approach has been to ask ‘What do “consumers” of research in this area find when they go to the literature?’.

Keywords

Exchange Rate Current Account Real Exchange Rate Trade Balance Money Demand 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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© Paul De Grauwe and Theo Peeters 1983

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