Can a Real Business Cycle Model without price and wage stickiness explain UK real exchange rate behaviour?

David Meenagh, A. Patrick Minford, Eric Nowell and Prakriti Sofat

No E2005/2, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: This paper establishes the ability of a Real Business Cycle model to account for real exchange rate behaviour, using UK data. We show that a productivity simulation is capable of explaining initial real appreciation with subsequent depreciation to a lower steady state. The model is tested by the method of indirect inference, bootstrapping the errors to generate 95% confidence limits for a time-series representation of the real exchange rate, as well as for various key data moments. The results suggest RBC models can explain real exchange rate movements.

Keywords: Real Exchange Rate; Productivity; Real Business Cycle; Bootstrap; Indirect Inference (search for similar items in EconPapers)
JEL-codes: E32 F31 F41 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2005-11, Revised 2010-03
New Economics Papers: this item is included in nep-dge, nep-ifn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Journal Article: Can a real business cycle model without price and wage stickiness explain UK real exchange rate behaviour? (2010)
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