Search Results

Showing results 1 to 1 of approximately 1.

(refine search)
SORT BY: PREVIOUS / NEXT
Keywords:Backus-Smith puzzle 

Working Paper
International Asset Markets and Real Exchange Rate Volatility

The real exchange rate is very volatile relative to major macroeconomic aggregates and its correlation with the ratio of domestic over foreign consumption is negative (Backus-Smith puzzle). These two observations constitute a puzzle to standard international macroeconomic theory. This paper develops a two country model with complete asset markets and limited enforcement for international financial contracts that provides a possible explanation of these two puzzles. The model performs better than a standard incomplete markets model with a single non-contingent bond unless very tight borrowing ...
International Finance Discussion Papers , Paper 884

FILTER BY Content Type

FILTER BY Author

FILTER BY Jel Classification

F31 1 items

G12 1 items

FILTER BY Keywords

PREVIOUS / NEXT