Money, capital and exchange rate fluctuations

Pedro Gomis Porqueras, Timothy C Y Kam, Junsang Lee

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

We explore how the informational frictions underlying monetary exchange affect international exchange rate dynamics. Our perfectly flexible price model is capable of producing endogenously rigid international relative prices in response to technology and monetary shocks. The model is capable of accounting for the empirical regularities that the real and nominal exchange rates are more volatile than U.S. output, and that the two are positively and perfectly correlated. The model is also consistent with other standard real business cycle facts for the United States.
Original languageEnglish
Pages (from-to)329 - 353
Number of pages25
JournalInternational Economic Review
Volume54
Issue number1
DOIs
Publication statusPublished - 2013

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