Exchange-rate economics for the resources sector

The paper provides an account of aspects of exchange-rate economics that are of particular relevance to the resources sector. The issues discussed include exchange-rate volatility and the risk management practices used to deal with it, the role of productivity differences across countries, and the impact of a booming resources sector on the country's exchange rate. The discussion is organized around a simple stylized model that emphasizes the quantity theory of money and purchasing power parity as a long-run link between prices and exchange rates.