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Cited by 4,665

The DOI matches its Crossref record.

Expectations and Exchange Rate Dynamics

Dornbusch, Rudiger·1976·Journal of Political Economy
DOI 10.1086/260506
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Abstract

The paper develops a theory of exchange rate movements under perfect capital mobility, a slow adjustment of goods markets relative to asset markets, and consistent expectations. The perfect foresight path is derived and it is shown that along that along that path a monetary expansion causes the exchange rate to depreciate. An initial overshooting of exchange rates is shown to derive from differential adjustment speed of markets. The magnitude and persistence of the overshooting is developed in terms of the structural parameters of the model. To the extent that output responds to a monetary expansion in the short run, this acts a a dampening effect on exchange depreciation and may, in fact, lead to an increase in interest rates.

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Metadata

Authors
Dornbusch, R.
Venue
Journal of Political Economy
Publisher
University of Chicago Press
Published
1976-12
Volume
84
Issue
6
Pages
1161-1176
ISSN
  • 0022-3808 (ISSN-L)
  • 1537-534X
DOI
10.1086/260506
OpenAlex
W2137873244
Cited by
4,665
References
0
FWCI
69.70
Type
journal article
Language
en
Open access
closed

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CoChat. (2026). Citation check: Expectations and Exchange Rate Dynamics. https://app.cochat.ai/papers/10.1086/260506
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Dornbusch, R. (1976). Expectations and Exchange Rate Dynamics. Journal of Political Economy. https://doi.org/10.1086/260506

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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.

Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).

Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.