Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/119522
Authors: 
Natividad-Carlos, Fidelina B.
Year of Publication: 
2014
Series/Report no.: 
Discussion Paper, School of Economics, University of the Philippines 2014-14
Abstract: 
While exchange rate dynamics is an important topic in open economy macroeconomics, the standard tool commonly used to introduce exchange rate dynamics - the Dornbusch (1976) seminal paper along with phase diagram - is not well-suited for undergraduate students as most of them do not have yet a background on dynamic macroeconomic analysis. This paper attempts to provide a graphical device - a panel IS*-LM* diagram - which can be used to teach intermediate macroeconomics students about Dornbusch's idea of exchange rate dynamics. In addition, it also attempts to bridge the gap between undergraduate teaching and graduate teaching of exchange rate dynamics by showing the correspondence between the economy's adjustment path in the IS*-LM* diagram and that in the phase diagram.
Subjects: 
undergraduate teaching
graduate teaching
exchange rates
exchange rate dynamics
sticky prices
interest parity
open economy macroeconomics
fiscal policy
monetary policy
JEL: 
A15
A23
F31
F41
Document Type: 
Working Paper

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