An Equilibrium Model of Exchange Rate Determination and Asset Pricing with Nontraded Goods and Imperfect Information

René Stulz

Journal of Political Economy, 1987, vol. 95, issue 5, 1024-40

Abstract: This paper presents a two-country model with maximizing households, stochastic production, stochastic money growth, and perfect capital mobility. Because of the presence of nontraded goods, households in different countries consume different goods. Analytic solutions are presented for the nominal exchange rate, the real exchange rate, nominal interest rates, and real interest rates. It is shown that the model is compatible with some important features of the real-world behavior of exchange rates. When households are imperfectly informed about the distribution of money growth, the exchange rate exhibits patterns of overshooting and is more volatile than the ratio of the money stocks. Copyright 1987 by University of Chicago Press.

Date: 1987
References: Add references at CitEc
Citations: View citations in EconPapers (48)

Downloads: (external link)
http://dx.doi.org/10.1086/261500 full text (application/pdf)
Access to full text is restricted to subscribers. See http://www.journals.uchicago.edu/JPE for details.

Related works:
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:ucp:jpolec:v:95:y:1987:i:5:p:1024-40

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().