Download or read book Taylor Rules and the Deutschmark-dollar Real Exchange Rate written by Charles Engel and published by . This book was released on 2004 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: "We explore the link between an interest rate rule for monetary policy and the behavior of the real exchange rate. The interest rate rule, in conjunction with some standard assumptions, implies that the deviation of the real exchange rate from its steady state depends on the present value of a weighted sum of inflation and output gap differentials. The weights are functions of the parameters of the interest rate rule. An initial look at German data yields some support for the model"--National Bureau of Economic Research web site.