Volatile and persistent real exchange rates with or without sticky prices

Michael J. Moore, Maurice J. Roche

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)

Abstract

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 processes. In the second, the model is simulated using estimated forcing processes. The theory, in both cases, is capable of explaining the high volatility and persistence of real and nominal exchange rates as well as the high correlation between real and nominal rates. © 2007 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)423-433
Number of pages11
JournalJournal of Monetary Economics
Volume55
Issue number2
DOIs
Publication statusPublished - Mar 2008

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

Fingerprint Dive into the research topics of 'Volatile and persistent real exchange rates with or without sticky prices'. Together they form a unique fingerprint.

Cite this