Results (
Thai) 2:
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The portfolio balance approach to exchange rate determination is largely attrib-
uted to Branson (1972, 1976), McKinnon (1969) and Dornbusch (1975), with fol-
low-ups of Branson et al. (1977, 1979), Girton and Henderson (1977) and Branson
and Henderson (1985). This chapter first introduces the setting of the model em-
bedded in the portfolio balance approach that encompasses three assets, which de-
viates from the models and approaches learned in the previous three chapters, and
the associated market equilibria. The effects of monetary policy under the portfo-
lio balance approach are examined next; followed by examinations of the effects
of changing economic environments in a two-country model, as well as the effect
of changes in risk perceptions.
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