The Economics of Exchange Rates

by Lucio Sarno and Mark P. Taylor

The Economics of Exchange Rates by Lucio Sarno and Mark P. Taylor provides an academic yet accessible exploration of exchange rate theory and its real-world applications.

The book begins by examining the fundamental economic models that explain exchange rate movements, including purchasing power parity, interest rate differentials, and monetary models. Sarno and Taylor then explore more advanced topics, such as the role of speculation, market expectations, and the impact of central banks on currency values.

The book also discusses the importance of capital flows, international trade balances, and economic fundamentals in determining exchange rates.

Through its detailed yet clear presentation, the authors explain how these theories can be applied to real-world currency markets, shedding light on the forces that influence the value of one currency relative to another.

The book is highly regarded for its balanced approach to both theory and empirical evidence, making it suitable for both students of economics and professionals in the finance industry.

By combining economic theory with practical insights, The Economics of Exchange Rates offers a comprehensive understanding of how currency values are determined and how they can affect global financial markets.