Table of contents for Exchange rates and international finance / Laurence S. Copeland.

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Note: Contents data are machine generated based on pre-publication provided by the publisher. Contents may have variations from the printed book or be incomplete or contain other coding.


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Contents
Preface to the fifth edition	xi
Publishers' acknowledgements	xiii
1	Introduction	1
Introduction	1
1.1	What is an exchange rate?	3
1.2	The market for foreign currency	14
1.3	Balance of payments	21
1.4	The DIY model	26
1.5	Exchange rates since World War II: a brief history	27
1.6	Overview of the book	37
Summary	38
Reading guide	39
Notes		39
Part I THE INTERNATIONAL SETTING	45
2	Prices in the open economy: purchasing power parity	47
Introduction	47
2.1	The law of one price in the domestic economy	48
2.2	The law of one price in the open economy	55
2.3	A digression on price indices	60
2.4	Purchasing power parity	63
2.5	Purchasing power parity + the facts at a glance	68
2.6	Purchasing power parity extensions	72
2.7	Empirical research	77
2.8	Conclusions	78
Summary	80
Reading guide	81
Notes		82
3	Financial markets in the open economy	85
Introduction	85
3.1	Uncovered interest rate parity	86
3.2	Covered interest rate parity	94
3.3	Borrowing and lending	96
3.4	Covered interest rate parity + the facts	100
3.5	Efficient markets + a first encounter	101
3.6	Purchasing power parity revisited	104
Summary	108
Reading guide	109
Notes		109
4	Open economy macroeconomics	112
Introduction	112
4.1	IS+LM model of aggregate demand	113
4.2	Aggregate supply	134
4.3	Conclusions	140
Summary	141
Reading guide	142
Notes		142
Part II EXCHANGE RATE DETERMINATION	147
5	Flexible prices: the monetary model	149
Introduction	149
5.1	The simple monetary model of a floating exchange rate	150
5.2	The simple monetary model of a fixed exchange rate	158
5.3	Interest rates in the monetary model	167
5.4	The monetary model as an explanation of the facts	169
5.5	Conclusions	173
Summary	173
Reading guide	174
Notes		174
6	Fixed prices: the Mundell+Fleming model	176
Introduction	176
6.1	Setting	177
6.2	Equilibrium	180
6.3	Monetary expansion with a floating exchange rate	181
6.4	Fiscal expansion with a floating exchange rate	182
6.5	Monetary expansion with a fixed exchange rate	184
6.6	Fiscal expansion with a fixed exchange rate	186
6.7	The monetary model and the Mundell+Fleming model compared	187
6.8	Evidence	191
6.9	Conclusions	192
Summary	192
Reading guide	192
Notes		193
7	Sticky prices: the Dornbusch model	195
Introduction	195
7.1	Outline of the model	196
7.2	Monetary expansion	201
7.3	A formal explanation	205
7.4	Oil and the UK economy	209
7.5	Empirical tests: the Frankel model	215
7.6	Conclusions	216
Summary	217
Reading guide	217
Notes		218
8	Portfolio balance and the current account	220
Introduction	220
8.1	Specification of asset markets	221
8.2	Short-run equilibrium	225
8.3	Long-run and current account equilibrium	230
8.4	Evidence on portfolio balance models	232
8.5	Conclusions	236
Summary	236
Reading guide	237
Notes		237
9	Currency substitution	239
Introduction	239
9.1	The model	240
9.2	Evidence on currency substitution	247
9.3	Conclusions	248
Summary	248
Reading guide	249
Notes		249
10	General equilibrium models	252
Introduction	252
10.1	The Redux model	254
10.2	Extensions of Redux	272
10.3	Evidence	275
10.4	Conclusions	276
Summary	277
Reading guide	278
Notes		278
Appendix 10.1: Derivation of price index (Equation 10.2)	280
Appendix 10.2: Derivation of household demand (Equations 10.6 and 10.6¿)	282
Appendix 10.3: Log linearization of model solution (Equations L1+L4)	282
Appendix 10.4: Sticky prices	284
11	Optimum currency areas and monetary union	285
Introduction	285
11.1	Benefits of monetary union	288
11.2	Costs of monetary union	293
11.3	Other considerations	296
11.4	Currency boards	306
11.5	Conclusions	308
Summary	309
Reading guide	310
Notes		310
Part III A WORLD OF UNCERTAINTY	315
12	Market efficiency and rational expectations	317
Introduction	317
12.1	Mathematical expected value	318
12.2	Rational expectations	320
12.3	Market efficiency	324
12.4	Unbiasedness	326
12.5	The random walk model	327
12.6	Testing for efficiency: some basic problems	329
12.7	Spot and forward rates: background facts	330
12.8	Results	332
12.9	Conclusions	335
Summary	336
Reading guide	337
Notes		337
13	The 'news' model and exchange rate volatility	340
Introduction	340
13.1	The 'news' model: a simple example	341
13.2	The monetary model revisited	343
13.3	Testing the 'news'	349
13.4	Results	353
13.5	Volatility tests, bubbles and the peso problem	355
13.6	Conclusions	360		Summary	360
Reading guide	361
Notes		362
14	Microstructure models	364
Introduction	364
14.1	Order flow analysis	365
14.2	Order flow	369
14.3	Microstructural analysis	376
14.4	Conclusions	386
Summary	388
Reading guide	388
Notes		389
15	The risk premium	391
Introduction	391
15.1	Assumptions	392			15.2	A simple model of the risk premium: mean+variance analysis	393
15.3	A general model of the risk premium	396
15.4	Evidence of the risk premium	402
15.5	Conclusions	403
Summary	403
Reading guide	404
Notes		404
Appendix 15.1: Derivation of Equation 15.12	405
16	A certain uncertainty: non-linearity, cycles and chaos	407
Introduction	407
16.1	Deterministic versus stochastic models	408
16.2	A simple non-linear model	409
16.3	Time path of the exchange rate	411
16.4	Chaos	424
16.5	Evidence	429
16.6	Conclusions	433
Summary	435
Reading guide	435
Notes		436
Part IV FIXED EXCHANGE RATES	439
17	Target zones	441
Introduction	441
17.1	What is a target zone?	443
17.2	Effect of target zones	444
17.3	Smooth pasting	448
17.4	An option interpretation	450
17.5	A honeymoon for policymakers?	458
17.6	Beauty and the beast: the target zone model meets the facts	461
17.7	Intramarginal interventions: leaning against the wind	463
17.8	Credibility and realignment prospects	465
17.9	Conclusions	467
Summary	467
Reading guide	468
Notes		469
Appendix 17.1: Formal derivation of the model	470
18	Crises and credibility	472
Introduction	472
18.1	First-generation model	473
18.2	Second-generation crisis models	481		18.3	Third-generation models	490
18.4	Conclusions	496
Summary	496
Reading guide	497
Notes		498
Part V CONCLUSIONS	501
19	Conclusions	503
Introduction	503
19.1	Summary of the book	503
19.2	Where do we go from here?	505
Appendix: list of symbols	508
Bibliography	510
Index		518

Library of Congress Subject Headings for this publication:

Foreign exchange rates.
International finance.