Exchange Rate Disconnect in General Equilibrium

• 成果类型: Article
• 署名作者: Itskhoki, Oleg; Mukhin, Dmitry
• 署名单位: University of California System; University of California Los Angeles; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/714447
• 发表日期: 2021
• 页码: 2183-2232
• 关键词: monetary-policy; business cycles; RATE VOLATILITY; RISK; consumption; puzzles; prices; models; identification; Heterogeneity

摘要

We propose a dynamic general equilibrium model of exchange rate determination that accounts for all major exchange rate puzzles, including Meese-Rogoff, Backus-Smith, purchasing power parity, and uncovered interest rate parity puzzles. We build on a standard international real business cycle model with home bias in consumption, augmented with shocks in the financial market that result in a volatile near-martingale behavior of exchange rates and ensure their empirically relevant comovement with macroeconomic variables, both nominal and real. Combining financial shocks with conventional productivity and monetary shocks allows the model to reproduce the exchange rate disconnect properties without compromising the fit of the business cycle moments.