The intention of this work is to examine whether the real or nominal exchange rate of an nation reflects information regarding the relative efficiency of the economy. This research reviews work carried out in the area of economic convergence, economic development and the exchange rate. A basic model for income is presented and residuals are analysed for further information on relative performance. These residuals are interpreted as a total factor productivity or Solow residual type measure coupled with information contained from the labour side of the economy. The sample covers the G7 countries and Australia, for the period 1950 to 1990. The model is estimated using the Johansen Maximum Likelihood Procedure (reduced rank condition) and not the residual based method associated with normal cointegrating analysis. The latter method has a number of drawbacks. The unit roots present in the time series are identified using an Augmented Dickey Fuller. Results imply the existence of unit roots, but the author cautions that this conclusion is limited by low power of unit root tests in general. Non-stationarity may be a temporary post-war phenomenon, and the conclusion of a unit root is dependent on the sample period chosen. The hypothesis is supported for six of the eight economies for the sample period 1960 to 1990. In some cases a statistical relationship exists between relative efficiency measures and the real exchange rate. This relationship is strongest in the 1950 to 1970 period. For the second half of the sample, results are less promising. A moving average is required to reduce the variability of the exchange rate measures. This produces results which are much more consistent and support the hypothesis. The residuals generated by the model are imperfect is various ways. Nevertheless, the work supports a relative efficiency argument. The estimation procedure is also noteworthy. It examines relative efficiency by combining the information contained within the labour side of the economy with possible Solow residuals, while establishing a link between real and monetary phenomena.