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Abstract

The monetary approach to exchange rate determination has been criticised because of the lack of empirical evidence. In this research note, a linear regression equation was estimated according to the monetary approach to explain changes in the nominal United States dollar/rand exchange rate for the years 1960-1988. Results indicate that this exchange rate is determined by relative United States and South African money supplies, nominal interest rates and real incomes. The R2 value was 0.965 percent.

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