Productivity Shocks and Delayed Exchange-Rate Overshooting

This paper uses a 'new open economy macroeconomics' model to study the effect of a productivity shock on exchange rate dynamics. The special features of the model are that households' preferences exhibit a 'catching up with the Joneses' effect and that international financial markets are imperfectly integrated. Numerical simulations of the model are used to demonstrate that these features imply that, in an otherwise standard ?new open economy macroeconomics' model, a productivity shock can give rise to a delayed overshooting of the exchange rate.

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Year of publication:	2004
Authors:	Pierdzioch, Christian
Publisher:	Kiel : Kiel Institute for the World Economy (IfW)
Subject:	Overshooting \| Neue Makroökonomik offener Volkswirtschaften \| Produktivität \| Schock \| Konsuminterdependenz \| Theorie \| catching up with the Joneses \| Productivity shock \| Exchange rate overshooting

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Series:	Kiel Working Paper ; 1199
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	379984210 [GVK] hdl:10419/17743 [Handle] RePEc:zbw:ifwkwp:1199 [RePEc]
Classification:	F31 - Foreign Exchange ; F41 - Open Economy Macroeconomics ; F32 - Current Account Adjustment; Short-Term Capital Movements
Source:	EconStor