Real exchange rates and real interest rates : a nonlinear perspective

World Real Interest Rates: A Global Savings and Investment Perspective

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...

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...

A Re-examination of the link between Real Exchange Rates and Real Interest Rate Differentials∗

The real exchange rate real interest rate (RERI) relationship is central to most open economy macroeconomic models. However, empirical support for the relationship, especially when cointegrationbased methods are used, is rather weak. In this paper we reinvestigate the RERI relationship using bilateral real exchange rate data spanning the period 1978 to 1997. We first clarify the logic of applyi...

Real exchange rates and real interest rate differentials: A present value interpretation

Although the real exchange rate real interest rate (RERI) relationship is central to most open economy macroeconomic models, empirical support for the relationship is generally found to be rather weak. In this paper we re-investigate the RERI relationship using bilateral U.S. real exchange rate data spanning the period 1978 to 2007. Instead of testing one particular model, we build on Campbell ...