The study involved extending a dynamic general equilibrium neoKeynesian model by considering preferences that exhibit intertemporal nonhomotheticity. Introducing this feature generates a state-dependent intertemporal elasticity of substitution, which induces asymmetric shifts in aggregate demand...

A puzzle in international macroeconomics is that observed real exchange rates are highly volatile. Standard international real business cycle (IRBC) models cannot reproduce this fact. We show that TFP processes for the U.S. and the ""rest of the world,"" is characterized by a vector error...