Publication
Feb 2004
This paper uses a "new open economy macroeconomics" model to study the effect of a productivity shock on exchange rate dynamics. The special features of the model are that households' preferences exhibit a "catching up with the Joneses" effect and that international financial markets are imperfectly integrated. The author shows that with these features incorporated a productivity shock can give rise to a delayed overshooting of the exchange rate.
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English (PDF, 28 pages, 326 KB) |
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Author | Christian Pierdzioch |
Series | Kiel Institute Working Papers |
Issue | 1199 |
Publisher | Kiel Institute for the World Economy |
Copyright | © 2004 Kiel Institute for the World Economy |