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2 edition of Can sticky price models generate volatile and persistent real exchange rates? found in the catalog.

Can sticky price models generate volatile and persistent real exchange rates?

V. V. Chari

Can sticky price models generate volatile and persistent real exchange rates?

by V. V. Chari

  • 49 Want to read
  • 16 Currently reading

Published by National Bureau of Economic Research in Cambridge, MA .
Written in English

    Subjects:
  • Prices -- Econometric models.,
  • Foreign exchange rates -- Econometric models.,
  • Business cycles.

  • Edition Notes

    StatementV.V. Chari, Patrick J. Kehoe, Ellen R. McGrattan.
    SeriesNBER working paper series -- no. 7869, Working paper series (National Bureau of Economic Research) -- working paper no. 7869.
    ContributionsKehoe, Patrick J., McGrattan, Ellen R., National Bureau of Economic Research.
    The Physical Object
    Pagination41, [10] p. :
    Number of Pages41
    ID Numbers
    Open LibraryOL22406328M

    Chari, V V, P Kehoe, and E McGrattan (),“Can Sticky Price Models Generate Volatile and Persistent Exchange Rates?” Review of Economic Studies 69(3): – Engel, C(), “Real Exchange Rate Convergence: The Roles of Price Stickiness and Monetary Policy,” Working Paper, September. and McGrattan () evaluate such models quantitatively and show that sticky price models are potentially capable of accounting for the highly volatile and persistent real exchange rates.1 To generate enough volatility, however, they have to assume a implausible parameter value of high.

    Abstract. There has been a considerable recent debate on the causes of low pass-through from exchange rates to consumer prices. This paper develops a simple model of a small open economy in which exchange rate pass-through is determined by the frequency of price changes of importing by: “Consumption and Real Exchange Rates in Dynamic Economies with Non-Traded Goods.” Journal of International Economics. 3. Chari, V.V., Patrick J. Kehoe, and Ellen R. McGrattan. “Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?” Review of Economic Studies. 69(3) (July ): Econ b: International.

    • Both the flex price and sticky price models try to explain the volatility in exchange rates. • In both models, exchange rates will be more volatile than the fundamentals. • The Dornbusch model illustrates one way to get volatility: hold one variable constant, so the other variable has to undertake all theFile Size: KB. Chari, V. V., Patrick J. Kehoe, and Ellen McGrattan, "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?" Review of Economic Studies 69 (August ): Corsetti, Giancarlo, and Paolo Pesenti, "The Simple Geometry of Transmission and Stabilization in Closed and Open Economy," Working Paper , National.


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Can sticky price models generate volatile and persistent real exchange rates? by V. V. Chari Download PDF EPUB FB2

Can Sticky Price Models Generate Volatile and Persistent The central puzzle in international business cycles is that fluctuations in real exchange rates are volatile and persistent.

We quantify the popular story for real exchange rate fluctuations: they are ∗This paper is a revised version of our paper “Monetary Shocks and. Downloadable. The central puzzle in international business cycles is that real exchange rates are volatile and persistent.

The most popular story for real exchange rate fluctuations is that they are generated by monetary shocks interacting with sticky goods prices. We quantify this story and find that it can account for some of the observed properties of real exchange rates. Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates.

V.V. Chari, Patrick J. Kehoe, Ellen R. McGrattan. NBER Working Paper No. Issued in September NBER Program(s):Economic Fluctuations and Growth Program, International Finance and Macroeconomics Program The central puzzle in international business cycles is that real exchange rates are volatile.

V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?," NBER Working Papers.

Clearly, real exchange rates are very volatile. We also see in Table 1 that both nominal and real exchange rates between the United States and Europe are highly persistent, with autocorrelations of and, respectively, and nominal and real exchange rates are. Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates.

CHARI, PATRICK J. KEHOE and ELLEN R. MCGRATTAN University of Minnesota, Federal Reserve Bank of Minneapolis and National Bureau of Economic Research First version received 18 December ; final version accepted 16 October (Eds.).

The relevance of these results is highlighted by the so-called exchange rate disconnect puzzle: the fact that real exchange rates across developed economies are very volatile, very persistent, and.

Clearly, real exchange rates are very volatile. We also see in Table 1 that both nominal and real exchange rates between the United States and Europe are highly persistent, with autocorrelations of and, respectively, and nominal and real exchange rates are very highly correlated with each other, with a cross-correlation of Abstract.

The central puzzle in international business cycles is that fluctuations in real exchange rates are volatile and persistent. We quantity the popular story for real exchange rate fluctuations: they are generated by monetary shocks interacting with sticky goods prices. Get this from a library.

Can sticky price models generate volatile and persistent real exchange rates?. [V V Chari; Patrick J Kehoe; Ellen R McGrattan; National Bureau of Economic Research.] -- Abstract: The central puzzle in international business cycles is that real exchange rates are volatile and persistent.

The most popular story for real exchange rate fluctuations is that they are. Additional Physical Format: Online version: Chari, V.V. Can sticky price models generate volatile and persistent real exchange rates.

Cambridge, MA: National Bureau of Economic Research, © This paper re-examines the ability of sticky-price models to generate volatile and persistent real exchange rates. We use a DSGE framework with pricing-to-market akin to those in Chari, et al.

This paper re-examines the ability of sticky-price models to generate volatile and persistent real exchange rates. We use a DSGE framework with pricing-to-market akin to those in Chari et al. () and Steinsson () to illustrate the link between real exchange rate dynamics and what the model assumes about physical capital.

The real exchange-rate puzzles is a common term for two much-discussed anomalies of real exchange rates: that real exchange rates are more volatile and show more persistence than what most models can account for. These two anomalies are sometimes referred to as the purchasing power parity puzzles.

Dornbusch's () exchange rate overshooting hypothesis argued that exchange rate volatility is. Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates. CHARI, PATRICK J. KEHOE and ELLEN R. MCGRATTAN University of Minnesota, Federal Reserve Bank of Minneapolis and National Bureau of Economic Research First version received 18 December ; final version accepted 16 October (Eds.).

The flexible-price two-country monetary model is extended to include a consumption externality with habit persistence. Two methodologies are employed to explore this model's ability to generate volatile and persistent exchange rates. In the first, actual data is used for the exogenous driving by: This paper re-examines the ability of sticky-price models to generate volatile and persistent real exchange rates.

We use a DSGE framework with pricing to market to illustrate the link between real exchange rate dynamics and what the model assumes about physical capital. The Real Exchange Rate in Sticky Price Models: Does Investment Matter?* Enrique Martinez-Garcia Federal Reserve Bank of Dallas Jens Søndergaard Bank of England July Abstract This paper re-examines the ability of sticky-price models to generate volatile and persistent real exchange rates.

In closed-economy models, it is widely known that inflation persistence can be explained either by sticky prices or by sticky wages. 2 Chari et al. () thus point out that the sticky wages are a promising avenue to increase the persistence of real exchange rates by monetary by: 4.

Volatile and persistent real exchange rates without sticky prices Michael J. Moore* exchange rate models produce higher root mean squared errors than the random walk model. RttSP Pt,where is the nominal exchange rate and is the price of country j goods.

induce contemporaneous price responses can cause lengthy real exchange rate adjust-ments. The evidence suggests that mechanisms unrelated to market rigidities are also responsible for the persistence in real exchange rates.

2. The model In this section, I use a two country model to motivate my defi nition of a sticky price shock.more persistent are the resulting real exchange rates. The idea of this paper is to develop and investigate a similar implication for the good level real exchange rates across countries: all else equal, the stickier are the prices for one type of good, the more persistent and.

Can sticky price models generate persistent and volatile real exchange rates? Review of Economic Studies – CrossRef Purchasing power parity and exchange rates. Greenwich: JAI Press. M., D. Peel, and L. Sarno. Nonlinear mean-reversion in real exchange rates: Toward a solution to the purchasing power parity puzzles.