EFFECTS OF EXCHANGE RATE IN LEARNING INFLATION

Abstract

The objective of this primary study is to investigate the effects of real exchange rate on inflation with a learning mechanism in floating exchange rate rule. More specifically we look at high inflation and high government deficit period. Marcet ve Nicolini (2003) Model is used to approach this issue. But we use the Floating Exchange Rate Rule, rather than Fixed Exchange Rate Rule. For simplicity, we also assume a balanced trade.