Graduation Year
2016
Date of Submission
4-2016
Document Type
Campus Only Senior Thesis
Degree Name
Bachelor of Arts
Department
Economics
Reader 1
Sven W. Arndt
Terms of Use & License Information
Rights Information
© 2016 Najeer Kheif D. Ahmed
Abstract
The assertion that financial flows are the primary drivers of exchange rates may be considered as financial markets become increasingly large and sophisticated. However, the Post-Keynesian critique leaves little room for the real economy to impact exchange rates. This paper aims to extend the Mundell-Fleming model to address the Post-Keynesian critique of mainstream models, by incorporating wealth effects, expectations, and Taylor-rule interest targeting. Discussion of significant financial events affecting the USDJPY exchange rate finds that wealth effects are significant considerations, and that the real economy cannot be discounted completely. Empirical results find that the real interest rate is a significant factor in exchange rate determination, tying into the discussion over the relationship between savings and consumption.
Recommended Citation
Ahmed, Najeer, "Addressing the Post-Keynesian Critique: Exchange Rate Determination with an Extended Mundell-Fleming Model" (2016). CMC Senior Theses. 1335.
https://scholarship.claremont.edu/cmc_theses/1335
This thesis is restricted to the Claremont Colleges current faculty, students, and staff.
