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Working Paper
In Search of Dominant Drivers of the Real Exchange Rate
We uncover the major drivers of macro aggregates and the real exchange rate at business cycle frequencies in Group of Seven countries. The estimated main drivers of key macro variables resemble each other and account for a modest fraction of the real exchange rate variances. Dominant drivers of the real exchange rate are orthogonal to main drivers of business cycles, generate a significant deviation of the uncovered interest parity condition, and lead to small movements in net exports. We use these facts to evaluate international business cycle models accounting for the dynamics of both macro ...
Working Paper
In Search of Dominant Drivers of the Real Exchange Rate
We uncover the major drivers of macro aggregates and the real exchange rate at business cycle frequencies in Group of Seven countries. The estimated main drivers of key macro variables resemble each other and account for a modest fraction of the real exchange rate variances. Dominant drivers of the real exchange rate are orthogonal to main drivers of business cycles, generate a significant deviation of the uncovered interest parity condition, and lead to small movements in net exports. We use these facts to evaluate international business cycle models accounting for the dynamics of both macro ...
Working Paper
In Search of Dominant Drivers of the Real Exchange Rate
We uncover the major drivers of each macroeconomic variable and the real exchange rate at the business cycle frequency in G7 countries. In each country, the main drivers of key macro variables resemble each other and none of those account for a large fraction of the real exchange rate variances. We then estimate the dominant driver of the real exchange rate and find that (i) the shock is largely orthogonal to macro variables and (ii) the shock generates a significant deviation of the uncovered interest parity condition. We analyze international business cycle models that are consistent with ...
Working Paper
Computerizing Households and the Role of Investment-Specific Productivity in Business Cycles
Advancements in computer technology have reshaped not only business operations but also household consumption. We estimate a business-cycle model disaggregating consumer IT and non-IT durable goods from the capital stock. We find that shocks to the supply of IT durables account for more than half of the variation in house- holds' real expenditure on IT durables. Furthermore, investment-specific productivity shocks drove nearly half of the rapid growth in household durable expenditures during the 2000s. Nonetheless, they have small influence over output dynamics, because unlike business ...
Working Paper
Land development and frictions to housing supply over the business cycle
Using a novel data set of U.S. residential land developments, we document that the average time to develop residential properties-which includes both the time spent preparing land infrastructures and construction-is about three years, consistent with sizable lags in housing investment projects. We show that the time to develop is highly dispersed across locations, a finding that helps quantify the housing supply elasticity that is relevant for assessing local housing variations over the business cycle. We also show that incorporating long and dispersed time to develop into an otherwise ...