Intermediate Goods and Exchange Rate Disconnect

William Craighead

Open Economies Review, 2020, vol. 31, issue 1, No 5, 113-129

Abstract: Abstract This paper introduces intermediate goods trade into a two-country real business cycle model and examines its implications for real exchange rate behavior. Intermediate goods trade is shown to reduce “exchange rate disconnect” by increasing the volatility of the real exchange rate relative to output and weakening the link between the real exchange rate and output. Intermediate goods trade also reduces the volatility of the terms of trade relative to the real exchange rate while increasing international output correlations and reducing the correlation between the trade balance and output.

Keywords: Real exchange rate; Exchange rate disconnect; Intermediate goods trade (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11079-019-09538-6 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Intermediate Goods and Exchange Rate Disconnect (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:openec:v:31:y:2020:i:1:d:10.1007_s11079-019-09538-6

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-019-09538-6

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().