Quotes from “Flexible Exchange Rates, Prices, and the Role of “News”: Lessons from the 1970s”

By Jacob Frenkel (1981)

• The reversal of the relation between the U.S. interest and the external value of the dollar which has taken place since mid 1979, indicates that currently the prime cause for fluctuations in U.S. interest rates is not variations in inflationary expectations but rather variations in the real rate of interest which are occasioned by large U.S. budget deficit.#
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• To some extent the overall poor performance of the purchasing power parities doctrine is specific to the 1970s. During the floating rates period of the 1920s, the doctrine seems to have been much more reliable.#
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