New Frontiers of Research in Exchange Rate Analysis

This paper attempts to present the progress of research work on exchange rates during the recent years. It has been divided into three sections. Section I presents the work that was carriecd on within the Keynesian framework. Section II presents a review of monetary models of exchange rate determination and frustrations met in that area. It also comments on the new emerging literature on macro-economic modelling. Section III presents a summary of the work on the effects of large exchange rate shocks on prices and quantities. Here, it first discusses the exchange rate pass through to export/import prices and quantities and then takes up an analysis of new concept named as "hysteresis". The paper offers some concluding remarks.