Consumption Smoothing and Exchange Rate Volatility

Bart Turtelboom

No 1995/108, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes exchange rate behavior in a model where consumers trade goods to diversify shocks to their income. A model with traded and nontraded goods is simulated in a multilateral context based upon historical output correlations for the period 1970–92. Simulation results indicate that the observed volatility of multilateral real exchange rates for the United States, Germany and Japan is not inconsistent with exchange rate volatility implied by consumption-smoothing behavior.

Keywords: WP; exchange rate; consumption Smoothing; exchange rate volatility; simulation result; price of nontradables; utility function; trade balance surplus; United States production; nontradables price; Real effective exchange rates; Real exchange rates; Trade balance; Foreign assets; Consumption (search for similar items in EconPapers)
Pages: 56
Date: 1995-11-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=1959 (application/pdf)

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:imf:imfwpa:1995/108

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().