Compare and contrast the Mundell-Fleming model with the monetary model of exchange rate determination. Indicate in your answer which of the models has a long-run focus and why.

The distinction between the two models should be made in terms of the price level being fixed and aggregate supply schedule being horizontal, UIRP and PPP not holding, capital mobility being imperfect, the importance of interest rates as an adjusting variable, etc., in the Mundell-Fleming model (M-F M), with the opposites holding for the monetary model (M M). These short-run (M-F M) versus long-run (M M) features mentioned above will lead to important differences in the policy implications in the two frameworks. Some diagrams and the basic equations should ideally be provided while discussing the various features of the two models.