EconPapers    
Economics at your fingertips  
 

How does the world interest rate affect the real exchange rate?

Karine Gente ()

No 84, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: This paper develops a two goods overlapping generations model (OLG) of a semi-small open economy. Due to the OLG structure, the world interest rate and the domestic rate of time preference need not to be equal. Consequently, this setting represents the minimal real framework to study the effects of a world interest rate shock on the real exchange rate (RER).We show that both medium and long-run effects of a positive interest rate shock depend on the net financial position of the domestic country vis-ý-vis the rest of the world. The path of the RER is non monotonic (undershooting) in the case of a creditor country, while the RER simply appreciates in a debtor country.

Date: 2002-08-29
New Economics Papers: this item is included in nep-cba and nep-ifn
References: Add references at CitEc
Citations:

Downloads: (external link)
http://repec.org/res2002/Gente.pdf full text

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:ecj:ac2002:84

Access Statistics for this paper

More papers in Royal Economic Society Annual Conference 2002 from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().

 
Page updated 2025-03-19
Handle: RePEc:ecj:ac2002:84