Volatile and Persistent Real Exchange Rates Without the Contrivance of Sticky Prices PDF Download
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Author: Michael Moore
Publisher:
ISBN:
Category :
Languages : en
Pages : 29
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Book Description
The flexible-price two-country monetary model is extended to include a consumption externality with habit persistence. The model is simulated using the artificial economy methodology. It successfully explains (i) the high volatility of nominal and real exchange rates, (ii) the high correlation between real and nominal rates, and (iii) the persistence of real exchange rates. It offers a neo-classical explanation for the Meese-Rogoff exchange rate forecasting puzzle.
Author: Michael Moore
Publisher:
ISBN:
Category :
Languages : en
Pages : 29
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Book Description
The flexible-price two-country monetary model is extended to include a consumption externality with habit persistence. The model is simulated using the artificial economy methodology. It successfully explains (i) the high volatility of nominal and real exchange rates, (ii) the high correlation between real and nominal rates, and (iii) the persistence of real exchange rates. It offers a neo-classical explanation for the Meese-Rogoff exchange rate forecasting puzzle.
Author: Maurice J. Roche
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 27
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Author: V. V. Chari
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 33
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Author: Mario John Crucini
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ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 60
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Book Description
Volatile and persistent real exchange rates are observed not only in aggregate series but also in the individual good level data. Kehoe and Midrigan (2007) recently showed that, under a standard assumption on nominal price stickiness, empirical frequencies of micro price adjustment cannot replicate the time-series properties of the law-of-one-price deviations. We extend their sticky price model by combining good specific price adjustment with information stickiness in the sense of Mankiw and Reis (2002). Under a reasonable assumption on the money growth process, we show that the model fully explains both persistence and volatility of the good-level real exchange rates. Furthermore, our framework allows for multiple cities within a country. Using a panel of U.S.-Canadian city pairs, we estimate a dynamic price adjustment process for each 165 individual goods. The empirical result suggests that the dispersion of average time of information update across goods is comparable to that of average time of price adjustment.--Author's description
Author: Patrick J. Kehoe
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Category :
Languages : en
Pages :
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The classic explanation for the persistence and volatility of real exchange rates is that they are the result of nominal shocks in an economy with sticky goods prices. A key implication of this explanation is that if goods have differing degrees of price stickiness then relatively more sticky goods tend to have relatively more persistent and volatile good-level real exchange rates. Using panel data, we find only modest support for these key implications. The predictions of the theory for persistence have some modest support: in the data, the stickier is the price of a good the more persistent is its real exchange rate, but the theory predicts much more variation in persistence than is in the data. The predictions of the theory for volatiity fare less well: in the data, the stickier is the price of a good the smaller is its conditional variance while in the theory the opposite holds. We show that allowing for pricing complementarities leads to a modest improvement in the theory's predictions for persistence but little improvement in the theory's predictions for conditional variances.
Author: V. V. Chari
Publisher:
ISBN:
Category :
Languages : en
Pages : 41
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Author: Enrique Martínez-García
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Category :
Languages : en
Pages :
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Author: V. V. Chari
Publisher:
ISBN:
Category :
Languages : en
Pages : 41
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Author: V.V. Chari
Publisher:
ISBN:
Category :
Languages : en
Pages : 41
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Book Description
Author: Alok Johri
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ISBN:
Category : Foreign exchange
Languages : en
Pages :
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