Limited participation and exchange rate dynamics: Does theory meet the data?

Frédéric Karamé, Lise Patureau () and Thepthida Sopraseuth

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Abstract: The paper explores the empirical dimensions of a New Open Economy Macronomy model characterized by credit market frictions. We find that these frictions are essential for the model to match a large set of moments of German data. Moreover, the simulated impulse response functions to supply and nominal shocks are consistent with VAR findings. Since the model is estimated on moments rather than on conditional IRFs, this underlines the ability of the model to match the data. Finally, monetary shocks do not seem to be the primary driving force behind the aggregate dynamics, which is consistent with the VAR literature.

Keywords: New Open Economy Macroeconomics; Limited participation model; Simulated method of moments; Structural estimation (search for similar items in EconPapers)
Date: 2008-04
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Citations: View citations in EconPapers (10)

Published in Journal of Economic Dynamics and Control, 2008, 32 (4), pp.1041-1087. ⟨10.1016/j.jedc.2007.04.007⟩

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Related works:
Journal Article: Limited participation and exchange rate dynamics: Does theory meet the data? (2008)
Working Paper: Limited Participation and Exchange Rate Dynamics: Does Theory Meet the Data? (2003)
Working Paper: Limited participation and exchange rate dynamics: does theory meet the data? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754292

DOI: 10.1016/j.jedc.2007.04.007

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