Hidden Bibliographic Details
| Other authors / contributors: | International Monetary Fund, issuing body.
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| ISBN: | 1455295760
9781455295760
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| Notes: | "April 5, 1988."
Includes bibliographical references (pages 21-22).
Print version record.
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| Summary: | This paper analyzes the dunamics of the real exchange rate and the price equity for a small open economy using an optimizing model in which the process of capital accumulation entails adjustment costs. The analysis demonstrates that along an adjustment path toward long-run equilibrium, appreciation of the real exchange rate will accompany a decline in the market price of equity, whereas depreciation of the real exchange rate will accompany a rise in the price of equity. This relationship results from the requirement that non-traded imputs are used in the investment process. In the short-run, though, the effects on these variables depend critically on whether disturbances originate in the non-traded sector and on whether disturbances perceived as temporary or permanent. The disturbances considered include changes in fiscal policies as well as changes in the world interest rate.
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| Other form: | Print version: Murphy, Robert G. Stock prices, real exchange rates, and optimal capital accumulation. [Washington, D.C.] : International Monetary Fund, 1988
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