Exchange Rates and Endogenous Productivity

Nils Mattis Gornemann
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Nils Mattis Gornemann: International Finance Board of Governors

No 1289, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: Real exchange rates display persistent medium cycle fluctuations and large half-lives. We propose an international macroeconomics model with endogenous productivity in which shortlived shocks induce low frequency movements similar to those observed in the data. The model amplifies stationary fluctuations generating persistent productivity differences between countries characterized by low frequency cycles in the real exchange rate. Our model also generates effortlessly large half-lives and reasonable business cycles moments. Finally, we validate the model implied co-movement between prices and technology using a panel of cross industrycountry data on patent and industry prices.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed019:1289

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