Arbeitspapier
Real exchange rate overshooting in real business cycle model: An empirical evidence from India
The objective of this paper is to establish the ability of a Real Business Cycle (RBC) model to account for the behaviour of the real exchange rate, using Indian data (1966-1997). We calibrate the dynamic general equilibrium open economy model (Minford, Sofat 2004) based on optimising decisions of rational agents, using annual data for India. The first order conditions from the households' and firms' optimisation problem are used to derive the behavioural equations of the model. The interaction with the rest of the world comes in the form of uncovered real interest rate parity and current account both of which are explicitly micro- founded. The paper discusses the simulation results of 1 percent per annum productivity growth shock, which shows that the real exchange rate appreciates and then goes back to a new equilibrium (lower than the previous one), producing a business cycle. Thus the behaviour of the real exchange rate may be explicable within the RBC context. Finally we test our model and evaluate statistically whether our calibrated model is seriously consistent with the real exchange rate data, using bootstrapping procedure. We bootstrap our model to generate pseudo real exchange rate series and find that the ARIMA parameters estimated for the actual real exchange rate data lie within the 95% confidence limits.
- Sprache
-
Englisch
- Erschienen in
-
Series: Cardiff Economics Working Papers ; No. E2008/1
- Klassifikation
-
Wirtschaft
- Thema
-
Kaufkraftparität
Real Business Cycle
Offene Volkswirtschaft
Indien
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Minford, Patrick
Pal, Soubarna
- Ereignis
-
Veröffentlichung
- (wer)
-
Cardiff University, Cardiff Business School
- (wo)
-
Cardiff
- (wann)
-
2008
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:42 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Minford, Patrick
- Pal, Soubarna
- Cardiff University, Cardiff Business School
Entstanden
- 2008
Ähnliche Objekte (12)
Can a Real Business Cycle Model without price and wage stickiness explain UK real exchange rate behaviour?
Oil prices and the dynamics of output and real exchange rate
On the equality of Real Interest Rates across borders in Integrated Capital Markets
Understanding UK trade agreements with the EU and other countries
The effects of Brexit on the UK economy
Evaluating European trading arrangements
Post-Brexit realism and international law: Renegotiating a bad Withdrawal Agreement
Where next for monetary policy? Lessons from the financial crisis and the pandemic
Commentary on economic projections and rules of thumb for monetary policy (by Athanasios Orphanides and Volker Wieland)
The banking crisis: A rational interpretation
A note rebutting the recent Cambridge Econometrics assessment of Brexit on the UK and London economies: Commissioned by London Mayor Khan
Free Trade under Brexit: Why its benefits have been widely underestimated
Can a Real Business Cycle Model without price and wage stickiness explain UK real exchange rate behaviour?
Oil prices and the dynamics of output and real exchange rate
On the equality of Real Interest Rates across borders in Integrated Capital Markets
Understanding UK trade agreements with the EU and other countries
The effects of Brexit on the UK economy
Evaluating European trading arrangements
Post-Brexit realism and international law: Renegotiating a bad Withdrawal Agreement
Where next for monetary policy? Lessons from the financial crisis and the pandemic
Commentary on economic projections and rules of thumb for monetary policy (by Athanasios Orphanides and Volker Wieland)
The banking crisis: A rational interpretation
A note rebutting the recent Cambridge Econometrics assessment of Brexit on the UK and London economies: Commissioned by London Mayor Khan
Free Trade under Brexit: Why its benefits have been widely underestimated
Can a Real Business Cycle Model without price and wage stickiness explain UK real exchange rate behaviour?
Oil prices and the dynamics of output and real exchange rate
On the equality of Real Interest Rates across borders in Integrated Capital Markets
Understanding UK trade agreements with the EU and other countries
The effects of Brexit on the UK economy
Evaluating European trading arrangements
Post-Brexit realism and international law: Renegotiating a bad Withdrawal Agreement
Where next for monetary policy? Lessons from the financial crisis and the pandemic
Commentary on economic projections and rules of thumb for monetary policy (by Athanasios Orphanides and Volker Wieland)
The banking crisis: A rational interpretation
A note rebutting the recent Cambridge Econometrics assessment of Brexit on the UK and London economies: Commissioned by London Mayor Khan