Initially the empirical evidence of Flexible Price Monetary model was provided by Frenkel, but after last 1970s, it was observed that this model does not provided valuable results related to the variations in the exchange rates. It was observed that in a complicated economy and high fluctuation in the exchange rates, the equations lead to breakdown by providing poor fits, incorrect coefficients and by failing in the general diagnosis of the equations.
This technique permitted to have a considerate empirical check on the monetary model of the ‘determination of the exchange rate’ .In such a case it is necessary to consist the exchange rate economics (Selover, 1987). The study was carried out for a time period which is lesser than 6 months. After the completion of the research, no evidence was found related to the usability of the monetary models as per the present scenarios. From the studies by Macdonald and Taylor (1994), it was found that the equations directly fail when they are used for a long run.
Flexible rate monetary model has been into use for a long time and is considered as an important model to understand the exchange rate information related to the product. The equations for the Flexible Model had been created in such a way that they assist in the understanding the monetary Exchange Rate. It was created with a view to provide a comprehensive approach towards the determination of the exchange rate. This concept was thought to be useful initially. But, in the present time due to the consistent fluctuation in the exchange rate, it is turned down by the researchers. The present empirical researchers have showed that the equations derived in the ‘Flexible Monetary Model’ failed. Thus, the present economists have turned down the ‘Flexible Monetary Model for exchange rate determination.’ In this research paper, the study has been done on the ‘fleixible Monetary Model’ and the utility of the same in the present times has been examined.