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http://hdl.handle.net/2445/121732
Title: | Revisiting real exchange rate volatility: Non-traded goods and cointegrated tfp Chockse [WP] |
Author: | Dogan, Aydan Bettendorf, Timo |
Keywords: | Mercat financer Transferència de tecnologia Tecnologia Financial market Technology transfer Technology |
Issue Date: | 2018 |
Publisher: | Universitat de Barcelona. Facultat d'Economia i Empresa |
Series/Report no: | [WP E-Eco18/375] |
Abstract: | International real business cycle (IRBC) models predict a real exchange rate volatility that is much lower than the levels observed in the data. In this paper, we build a two-country IRBC model with both a traded and a non-traded goods sector, and calibrate it to UK-euro area (EA) data. We provide evidence on the existence of a cointegrating relationship between UK and EA traded sector total factor productivity (TFP) by estimating a vector error correction model (VECM). To account for this relationship, we incorporate non-stationary technology shocks in the traded sectors in our model, and show that then the model is able to match the observed volatility of the UK-EA real exchange rate. Our analysis points out that both the presence of non-traded sectors and non-stationary technology shocks are necessary to account for the observed volatility in the real exchange rate. |
It is part of: | UB Economics – Working Papers, 2018, E18/375 |
URI: | http://hdl.handle.net/2445/121732 |
ISSN: | 1136-8365 |
Appears in Collections: | UB Economics – Working Papers [ERE] Documents de treball / Informes (Economia) |
Files in This Item:
File | Description | Size | Format | |
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E18-375_Dogan+Bettendorf.pdf | 483.96 kB | Adobe PDF | View/Open |
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