Exchange rate dynamics in a peripheral monetary economy

This paper discusses exchange rate behavior in what we call a peripheral monetary economy. First, it analyzes the essential properties of an open monetary economy, stressing the notions of assets' own rates of interest, liquidity preference, uncertainty, and conventions. The paper also approaches the historical and institutional peculiarities associated with the way in which peripheral economies are integrated into the existing international monetary and financial system (so-called financial globalization in the post-Bretton Woods era), and reappraises the idea of "peripheral condition." Against this background, it examines the characteristics of exchange rate behavior in these economies.