Roche, Morice and Moore, Michael (2002) Volatile and persistent real exchange rates without the contrivance of sticky prices. UNSPECIFIED. (Unpublished)

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Abstract

The flexible-price two-country monetary model is extended to include a consumption externality with habit persistence. The model is simulated using the artificial economy methodology. It successfully explains (i) the high volatility of nominal and real exchange rates, (ii) the high correlation between real and nominal rates, and (iii) the persistence of real exchange rates. It offers a neo-classical explanation for the Meese-Rogoff exchange rate forecasting puzzle.

Item Type:	Other
Additional Information:	N116/04/02
Keywords:	Artificial Economy; Real and Nominal Exchange Rates; Habit Persistence
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	85
Depositing User:	Ms Sandra Doherty
Date Deposited:	10 Feb 2005
Refereed:	No
URI:
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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