Volatility and persistence of simulated DSGE real exchange rates

We investigate the time series properties of both filtered and unfiltered real exchange rate series produced by DSGE models that feature local currency pricing, home bias, nontraded goods, and incomplete markets. Detrended series produced by several specifications approach the empirically observed volatility, although none of the models generates enough persistence. Conversely, several models produce unfiltered series that possess the same degree of persistence as the data, but none can match its volatility.