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Author Rabanal, Pau, author.

Title Can international macroeconomic models explain low-frequency movements of real exchange rates? / Pau Rabanal and Juan F. Rubio-Ramírez
Published [Washington, D.C.] : International Monetary Fund, ©2012

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Description 1 online resource (42 pages) : illustrations
Series IMF working paper ; WP/12/13
IMF working paper ; WP/12/13.
Contents Cover; Contents; I. Introduction; II. Spectral Analysis of the RER; III. Relationship to the Literature; Tables; 1. Variance Decomposition of the RER (in percent); IV. The Baseline Model; A. Households; B. Firms; B.1 Final goods producers; B.2 Intermediate goods producers; B.3 TFP processes; C. Market Clearing; D. Equilibrium Conditions; V. Results of the Baseline Model; A. Benchmark Calibration for the Baseline Model; B. Matching the RER Spectrum; C. Some Robustness; 2. Implications of the Model with TFP Only; 3. Robustness; VI. Extensions to the Baseline Model
Summary Real exchange rates exhibit important low-frequency fluctuations. This makes the analysis of real exchange rates at all frequencies a more sound exercise than the typical business cycle one, which compares actual and simulated data after the Hodrick-Prescott filter is applied to both. A simple two-country, two-good model, as described in Heathcote and Perri (2002), can explain the volatility of the real exchange rate when all frequencies are studied. The puzzle is that the model generates too much persistence of the real exchange rate instead of too little, as the business cycle analysis asserts. Finally, we show that the introduction of adjustment costs in production and in portfolio holdings allows us to reconcile theory and this feature of the data
Notes At head of title: IMF Institute
Title from PDF title page (IMF Web site, viewed January 19, 2012)
"January 2012."
Bibliography Includes bibliographical references
Subject Foreign exchange rates -- Econometric models
Business cycles -- Econometric models
Business cycles -- Econometric models
Foreign exchange rates -- Econometric models
Form Electronic book
Author Rubio-Ramírez, Juan Francisco, author.
IMF Institute, issuing body.