Monetary Shocks and Real Exchange Rate Dynamics: A Reappraisal

Jean-Olivier Hairault and Thepthida Sopraseuth

Post-Print from HAL

Abstract: This paper proposes a two-country general-equilibrium model incorporating a tradable sector with pricing-to-market as well as a nontradable sector. In that case, real exchange rate fluctuations arise from two sources: changes in the relative price of traded goods, that exemplify deviations from the law of one price, and movements in the relative price of traded to nontraded goods across countries. Our framework sheds light on the propagation mechanisms through which monetary shocks affect the real exchange rate. More specifically, the two components respond in opposite directions to monetary disturbances, which is consistent with data. Besides, the introduction of nontraded goods does not alter the predictive power of monetary shocks because the presence of nontraded goods magnifies the response of the deviation from the law of one price.

Keywords: Exchange rate; pricing to market (search for similar items in EconPapers)
Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Published in Review of International Economics, 2005, 13 (3), pp.576-596. ⟨10.1111/j.1467-9396.2005.00524.x⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Monetary Shocks and Real Exchange Rate Dynamics: a Reappraisal (2005)
Working Paper: Monetary Shocks and Real Exchange Rate Dynamics: A Reappraisal (2005)
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:hal:journl:halshs-00270302

DOI: 10.1111/j.1467-9396.2005.00524.x

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().