Dornbusch Views
Dornbusch Views
His main focusing area of study was macro economics and international economics. His examination on exchange rate issues and his view on sticky markets, volatile markets and hyperinflation are a part of his research papers. He felt with the increased globalization the economies are becoming interdependent and this leads to a cyclical transfer of capitals and transactions. As per the sticky markets he felt that there existed two types of goals:
Internationally traded: The prices of such commodities are flexible and hence they adapt with the exchange rate, with the country being the price taker. An example could be that of the Indian crude oil import wherein barrels of oil are purchased with the dollar rate fluctuation. (Dornbusch ,2005)
Internationally non traded: These are assumed to have sticky price that is they lowly stabilize with a period of time. An apt example could be that of insurance policies and mutual finds in a particular economy. (Rüdiger Dornbusch, Sebastian Edwards ,1995)
This monetary theory by him shows that the inflow of money in an economy also predicts some amount of deprecation. With these sticky prices the rate of inflation in an economy is always assumed to be lesser than the monetary supply enhancement. Hence Dornbusch inferred that this increased money demand leads to price rise stability in a sticky market. According to him an excess of monetary inflow will lead a rise in bond prices and hence lower the bond yield in any fiscal set up. This leads to a depreciated currency value in the international exchange market. This increases the price of the tradable goods compared to the monetary in flow. This and a comparatively lesser interest rate also help to asseverate the short-run balance of money demand and supply chain and hence the non-traded goods prices experience a rise. This hence makes the exchange rate move up in proportion to the money supply. This is what according to Dornbusch as foreseen in the
His main focusing area of study was macro economics and international economics. His examination on exchange rate issues and his view on sticky markets, volatile markets and hyperinflation are a part of his research papers. He felt with the increased globalization the economies are becoming interdependent and this leads to a cyclical transfer of capitals and transactions. As per the sticky markets he felt that there existed two types of goals:
Internationally traded: The prices of such commodities are flexible and hence they adapt with the exchange rate, with the country being the price taker. An example could be that of the Indian crude oil import wherein barrels of oil are purchased with the dollar rate fluctuation. (Dornbusch ,2005)
Internationally non traded: These are assumed to have sticky price that is they lowly stabilize with a period of time. An apt example could be that of insurance policies and mutual finds in a particular economy. (Rüdiger Dornbusch, Sebastian Edwards ,1995)
This monetary theory by him shows that the inflow of money in an economy also predicts some amount of deprecation. With these sticky prices the rate of inflation in an economy is always assumed to be lesser than the monetary supply enhancement. Hence Dornbusch inferred that this increased money demand leads to price rise stability in a sticky market. According to him an excess of monetary inflow will lead a rise in bond prices and hence lower the bond yield in any fiscal set up. This leads to a depreciated currency value in the international exchange market. This increases the price of the tradable goods compared to the monetary in flow. This and a comparatively lesser interest rate also help to asseverate the short-run balance of money demand and supply chain and hence the non-traded goods prices experience a rise. This hence makes the exchange rate move up in proportion to the money supply. This is what according to Dornbusch as foreseen in the
References: Dornbusch (2005) Macroeconomics, New South Wales: Pearson Publish Guido Di Tella, Rudiger Dornbusch (1986) The Political economy of Argentina Laurence D. Steinberg, Laurence Steinberg, Benson Bradford Brown, Sanford M. Dornbusch (1997) Beyond the classroom: why school reform has failed and what parents need to d , New South Wales: Pearson Publish Richard E. Caves, Lawrence B. Krause, Rudiger Dornbusch (1984) The Australian economy: a view from the North, London: Cyrus Publishers Rüdiger Dornbusch (1993) Policymaking in the open economy: concepts and case studies in economic , New South Wales: Pearson Publish Rüdiger Dornbusch, James M. Poterba (1999) Global warming: economic policy responses, New York: Pearson Publish Rüdiger Dornbusch, Sebastian Edwards (1995) Reform, recovery, and growth: Latin America and the Middle East , Egypt :Sultan Publishers Rüdiger Dornbusch, Stanley Fischer (1990) Macroeconomics, New South Wales: Pearson Publish