This paper studies how the choice of fixed or flexible exchange rate regimes is affected by the existence of intensive and extensive margins. We study two models where firms enter during or before each period of production. We show how the the choice of those regimes depend on the level and the...

This paper investigates a consumption-real exchange rate anomaly from the open macroeconomics literature known as the Backus-Smith puzzle . We both analytically and quantitatively examine how an expansion of trade along extensive margins can contribute to the puzzle's resolution. Our argument is...

In the last few decades, the world economy has witnessed the expansion of trade especially in the number of exchanged varieties, the so-called "extensive margins". In a theoretical model where extensive margins in both traded and non-traded sectors are endogenously determined, it is shown that...

This paper analyzes equity and bond positions in a two-country DSGE model where the number of varieties, i.e. extensive margin is endogenously determined. Households take care about not only the price of goods but also the variety of goods they consume. The welfare-based real exchange rate...