Permanent Increase in Ms: Short- and Long-Run

This lecture covers the effects of a permanent increase in money supply on short- and long-run equilibrium, focusing on the CHF/EUR exchange rate, real money holdings, and the adjustment to long-run equilibrium. It also discusses a long-run model based on Purchasing Power Parity (PPP) and empirical evidence on the Fisher relationship in Switzerland and the United States, using the Big Mac index. The lecture explores the concept of purchasing-power parity and its application in determining exchange rates through the prices of identical goods. It also delves into the implications of currency misalignment and the significance of the Big Mac index in understanding exchange-rate theory.