The purpose of this paper is to develop in mathematical form the partial equilibrium model of the exchange rate changes. This paper deals with formal relationships between demand for and supply of foreign exchange, assuming that there are two countrie...
The purpose of this paper is to develop in mathematical form the partial equilibrium model of the exchange rate changes. This paper deals with formal relationships between demand for and supply of foreign exchange, assuming that there are two countries. home country(Korea) and foreign country(USA), with national currencies the won and the dollar. The results show that the export prices and terms of trade depend on the supply elasticity of exports and the demand elasticity of imports.