Delayed Overshooting and Real Exchange Rate Persistence in an Imperfect Information Model

14 Pages Posted: 14 Feb 2011

See all articles by Mathias Hoffmann

Mathias Hoffmann

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Jens Søndergaard

affiliation not provided to SSRN

Niklas Johan Westelius

CUNY Hunter College - Department of Economics

Abstract

Recent studies have pointed out that monetary shocks in sticky price models cannot generate real exchange rates that exhibit delayed overshooting and are highly persistent. This paper demonstrates that such exchange rate dynamics can be generated by incorporating incomplete information about the true nature of the monetary shock into a standard New Keynesian model of a small open economy.

Suggested Citation

Hoffmann, Mathias and Søndergaard, Jens and Westelius, Niklas Johan, Delayed Overshooting and Real Exchange Rate Persistence in an Imperfect Information Model. Scottish Journal of Political Economy, Vol. 58, No. 2, pp. 248-261, 2011, Available at SSRN: https://ssrn.com/abstract=1760283 or http://dx.doi.org/10.1111/j.1467-9485.2011.00545.x

Mathias Hoffmann

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Jens Søndergaard

affiliation not provided to SSRN

Niklas Johan Westelius

CUNY Hunter College - Department of Economics ( email )

695 Park Avenue
New York, NY 10021
United States
212-772-5433 (Phone)

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