Hoffmann, Mathias; Hürtgen, Patrick - 2021
According to the two-country full information New Keynesian model with flexible exchange rates, the real exchange rate … causes a real exchange rate depreciation that partially absorbs the demand shock. (ii) A VAR with an identified demand shock … via sign restrictions is consistent with a real exchange rate depreciation at the ZLB. (iii) When the ZLB is binding in …