This book considers the interaction of the real and financial sectors of the economy. It studies the relation between theoretical models and the actual, and asks how the the functioning of national and international capital markets should be evaluated. The book begins with an introduction laying out the issues in a non-technical way and summarizing the main arguments of the book. Succeeding chapters deal with the many complexities of the financial markets. The book is aimed at financial practitioners, academics and students.
Integration and efficency of international capital markets - an overview; the real exchange rate; rational expectations and welfare in financial futures markets; an evaluation of the performance of speculative markets; cobwebs, rational expectations and futures markets; price volatilty and speculation.