Technical Note on 'The Real Exchange Rate in Sticky Price Models: Does Investment Matter?'

82 Pages Posted: 4 May 2009

See all articles by Jens Sondergaard

Jens Sondergaard

Bank of England - Monetary Analysis

Enrique Martínez-García

Federal Reserve Bank of Dallas - Research Department

Date Written: July 1, 2008

Abstract

This technical note is developed as a mathematical companion to the paper ‘The Real Exchange Rate in Sticky Price Models: Does Investment Matter?’ (GMPI working paper no.17). It contains three basic calculations. First, we derive the equilibrium conditions of the model. Second, we compute the zero-inflation, zero-trade balance (deterministic) steady state. Third, we describe the log-linearization of the equilibrium conditions around the deterministic steady state. Simultaneously, we explain the system of equations that constitutes the basis for the paper to broaden its scope. Commentary is provided whenever necessary to complement the model description and to place into context the assumptions embedded in our DSGE framework.

Keywords: Real Exchange Rate, PPP puzzle, Monetary Policy

JEL Classification: F31, F37, F41

Suggested Citation

Sondergaard, Jens and Martinez-Garcia, Enrique, Technical Note on 'The Real Exchange Rate in Sticky Price Models: Does Investment Matter?' (July 1, 2008). Available at SSRN: https://ssrn.com/abstract=1396288 or http://dx.doi.org/10.2139/ssrn.1396288

Jens Sondergaard

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

Enrique Martinez-Garcia (Contact Author)

Federal Reserve Bank of Dallas - Research Department ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States
214-922-5262 (Phone)

HOME PAGE: http://sites.google.com/view/emgeconomics

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