This paper develops a theory of international capital flows based upon a monetary-equilibrium, rational-expectation theory of exchanged rate determination extended to include the official intervention and possible sterilization of its effects upon the monetary base that are part of the post-1973...

This paper aims to remedy difficulties with some extant empirical tests of the monetary approach to exchange rate determination. Four problems are addressed: explication of and allowance for real exchange rate changes; imposition of interest parity; use of the forward rate as an unbiased...

This paper derives a reduced-form expression for an interestrate in an open economy by incorporating after tax covered interest parity conditions into a simple neo-classical macro model. The result clearly demonstrates that the relationship between an interest rate and variables used to explain...