This book explores the key issues relating to links between exchange rate instability and domestic inflation, including real exchange rate and interest rate manifestations, and the co-variability of exchange rates and commodity prices. The common theme throughout is the behavior of asset prices and interest rates in international markets. A number of interrelated questions regarding the interactions of exchange rates, interest rates and commodity prices are posed: ? Why is purchasing power parity invariably controversial? ? Despite overwhelming evidence that sterilized central bank interventions are impotent, why do major industrialized countries (such as the G-7) continue to look for accords to stem exchange rate volatility? ? Why are the currencies of resource-based economies depreciating when the commodity prices are holding up? ? Has the link between exchange rates and commodity prices collapsed? ? In a world of increasing...
