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In this paper we study two long-standing puzzles in the International Finance literature: the fact that the real exchange rate (RER) is very volatile (RER volatility puzzle) and that it covaries negatively with domestic consumption relative to foreign consumption (Backus-Smith puzzle). To...
Persistent link: https://www.econbiz.de/10011080471
This paper explores the nature of consumption risk-sharing within and across countries. A basic prediction of efficient risk sharing is that relative consumption growth rates across countries or regions should be positively related to real exchange rate growth rates across the same areas. We...
Persistent link: https://www.econbiz.de/10011081358