real exchange rates

Euro-Dollar Real Exchange Rate Dynamics in an Estimated Two-Country Model: What is Important and What is Not

JEL codes: 
C11, F41
Version Date: 
Oct 2006

Central puzzles in international macroeconomics are why fluctuations of the real exchange rate are so volatile with respect to other macroeconomic variables, and the contradiction of efficient risk-sharing. Several theoretical contributions have evaluated alternative forms of pricing under nominal rigidities along with different asset markets structures to explain real exchange dynamics.

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