This study focuses on the effects of nominal shocks on the real exchange rate. The model used to determine the effects of a monetary expansion on the real exchange rate assumes instantaneously clearing asset markets and sticky goods prices. A monetary expansion causes the nominal exchange rate to initially overshoot its long run equilibrium value followed by a series of appreciations. The real exchange rate depreciates sharply and then appreciates until its initial value is restored. / A simple monetary model, a sticky price monetary model and a random walk model are empirically tested with Canadian/U.S. data over the 1972-1989 time period. Both monetary models were rejected and the random walk model represented the best fit to the data. This evidence supports the hypothesis that the Canadian/U.S. nominal exchange rate follows a random walk process. / An empirical examination of the Canadian real exchange rate over the 1970-1989 period confirms the hypothesis that since the advent of the floating exchange rate period, the Canadian real exchange rate movements have been much larger than most economists predicted.

Thesis (Ph. D.)--University of Pennsylvania, 1990. / Includes bibliographical references (leaves 324-330).

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Thesis (M.B.A.)--University of North Carolina Wilmington, 2008. / Title from PDF title page (viewed May 28, 2009) Includes bibliographical references (p. [39]-42.)