Inequality and Real Exchange Rates

Inequality and Real Exchange Rates

Kocherlakota and Pistaferri (2007) describe two different models (Private Information Pareto Optimal and Incomplete Markets) of how households partially insure themselves against idiosyncratic shocks. They demonstrate that the models differ in terms of their implications for real exchange rates. In this paper, we use data from a wide range of countries, and document that there is a statististic...

Persistent Real Exchange Rates

Three features of the international exchange rate data that are widely known are: (a) a high correlation between bilateral nominal and real exchange rates; (b) real exchange rate movements are highly persistent; and (c) real exchange rates are highly volatile. This paper attempts a joint, albeit partial, rationalization of these facts in an environment with no staggered contracts and where pric...

Income Inequality and the Real Exchange Rate

This paper explores the effect of income inequality on the real exchange rate, through two general equilibrium channels: (i) the aggregation of individual demands derived from non-homothetic preferences; (ii) the workings of Samuelson-Balassa through the effect of inequality on the aggregation of human capital. A variety of effects are possible depending on the sectoral expenditure elasticities...

Fractional cointegration and real exchange rates

This paper uses fractional integration and cointegration in order to model the DM/dollar and the yen/dollar real exchange rates in terms of both monetary and real factors, more specifically real interest rate and labour productivity differentials. We find that whilst the individual series may be integrated of order 1, their long-run relationship might have a fractionally cointegrated structure....

Real exchange rates , dollarization and industrial