Arbeitspapier
Real exchange rates and international co-movement: news-shocks and non-tradable goods with complete markets
We propose a fully flexible, complete-market model of the international business cycle that is consistent with two major empirical facts: positive cross-country co-movement of economic aggregates and a negative correlation between the real exchange rate and relative consumption (the Backus-Smith puzzle). The novelty of our paper is twofold. First, we allow for imperfect substitutability of capital which significantly reinforces Harrold-Balassa-Samuelson effects, producing more empirically relevant movements in real exchange rates. Second, we introduce changes in expectations (news-shocks) as an explanation to the Backus-Smith puzzle through movements in relative hours across countries, while being consistent with expectations-driven economic expansions.
- ISBN
-
978-92-899-2194-7
- Language
-
Englisch
- Bibliographic citation
-
Series: ECB Working Paper ; No. 1946
- Classification
-
Wirtschaft
Open Economy Macroeconomics
International Business Cycles
- Subject
-
Backus-Smith Puzzle
news-driven cycles
real-exchange rates
- Event
-
Geistige Schöpfung
- (who)
-
Lambrias, Kyriacos
- Event
-
Veröffentlichung
- (who)
-
European Central Bank (ECB)
- (where)
-
Frankfurt a. M.
- (when)
-
2016
- DOI
-
doi:10.2866/949206
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Lambrias, Kyriacos
- European Central Bank (ECB)
Time of origin
- 2016
Other Objects (12)
Investment Shocks and Macroeconomic Co-Movement
Wage Dynamics and Bulgaria: Co-movement and Causality
Public and private sector wages: co-movement and causality
Wage Dynamics in Bulgaria: Co-movement and Causality
Commodity price co-movement and global economic activity
Correlation, price discovery and co-movement of ABS and equity
Liberalization and stock market co-movement between emerging economies
Business Cycle Desynchronisation: Amplitude and Beta vs. Co-movement
Volatility co-movement and the great moderation: An empirical analysis
Proximity and price co-movement in West African rice markets
Cross-country co-movement of real and nominal term structures
Exchange rate shocks and inflation comovement in the euro area
Investment Shocks and Macroeconomic Co-Movement
Wage Dynamics and Bulgaria: Co-movement and Causality
Public and private sector wages: co-movement and causality
Wage Dynamics in Bulgaria: Co-movement and Causality
Commodity price co-movement and global economic activity
Correlation, price discovery and co-movement of ABS and equity
Liberalization and stock market co-movement between emerging economies
Business Cycle Desynchronisation: Amplitude and Beta vs. Co-movement
Volatility co-movement and the great moderation: An empirical analysis
Proximity and price co-movement in West African rice markets
Cross-country co-movement of real and nominal term structures
Exchange rate shocks and inflation comovement in the euro area
Investment Shocks and Macroeconomic Co-Movement
Wage Dynamics and Bulgaria: Co-movement and Causality
Public and private sector wages: co-movement and causality
Wage Dynamics in Bulgaria: Co-movement and Causality
Commodity price co-movement and global economic activity
Correlation, price discovery and co-movement of ABS and equity
Liberalization and stock market co-movement between emerging economies
Business Cycle Desynchronisation: Amplitude and Beta vs. Co-movement
Volatility co-movement and the great moderation: An empirical analysis
Proximity and price co-movement in West African rice markets
Cross-country co-movement of real and nominal term structures