> In a world in which transaction demand on the current account was the sole
> basis for forex markets, with constant PPP and never a whiff of pricing to
> market, then this type of analysis would make sense. We're not
> in that world, however. Peter
>
AND . . . . ???
mbs
Max, this is governed by the, ahem, Marshall-Lerner conditions: the sum of
import and export price elasticities must be greater than one. People who study
such things say the conditions are always met, but the structuralist tradition
holds that they are met only within limits. This is something
In a world in which transaction demand on the current account was the sole
basis for forex markets, with constant PPP and never a whiff of pricing to
market, then this type of analysis would make sense. We're not in that world,
however.
Peter
Michael Pollak wrote:
> On Wed, 30 Jan 2002, Max Sa
Depends on the price elasticity. If the price of jellybeans goes down,
do you spend more or less on jellybeans? But I should beg off on this.
I don't do trade. --mbs
> Wouldn't a decrease in the total cost of goods lead to a *decrease* in the
> demand for dollars? In which case, the rest of
