Theories of Exchange Rate Determination: A Brief Theoretical Review

This paper endeavored to categorise and evaluate exchange rate theories. These theories included the International Fischer's Effect Theory, the Purchasing Power Parity Theory, the Interest Rate Parity Theory, the Balance of Payments Theory, the Monetary Approach to Foreign Exchange, and the Portfolio Balance Approach. The paper analyses these theories' advantages and disadvantages. Keywords: Exchange Rate; Purchasing Power Parity Theory; Interest Rate; Portfolio Balance Approach; Monetary Approach; Foreign Exchange DOI: 10.7176/EJBM/14-20-08 Publication date:October 31st 2022