International Business Cycles and Exchange Rates
Posted: 17 Oct 1996
Date Written: August 1996
International real business cycle models are not able to account for the high volatility of imports, exports, the trade balance and the terms of trade. By introducing exogenous exchange rate movements in addition to standard technological shocks, the model presented here comes much closer to replicating the relatively high volatility observed in the data while also improving other moments.
JEL Classification: E32, F31, F41
Suggested Citation: Suggested Citation