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Consumption Smoothing and Exchange Rate Volatility

This paper analyzes exchange rate behavior in a model where consumers trade goods to diversify shocks to their income. A model with traded and nontraded goods is simulated in a multilateral context based upon historical output correlations for the period 1970–92. Simulation results indicate that the...

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Bibliographic Details
Main Author: Turtelboom, Bart
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1995
Series:IMF Working Papers
Subjects:
Real Exchange Rates
Foreign Assets
Real Effective Exchange Rates
International Investment
Macroeconomics: Consumption
Currency
Long-term Capital Movements
Empirical Studies Of Trade
Open Economy Macroeconomics
Saving
Wealth
Foreign Exchange
International Economics
Macroeconomics
Economics
Balance Of Trade
Consumption
National Accounts
Exports And Imports
Investments, Foreign
Trade Balance
External Position
Macroeconomic Aspects Of International Trade And Finance: Forecasting And Simulation
International Trade
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper analyzes exchange rate behavior in a model where consumers trade goods to diversify shocks to their income. A model with traded and nontraded goods is simulated in a multilateral context based upon historical output correlations for the period 1970–92. Simulation results indicate that the observed volatility of multilateral real exchange rates for the United States, Germany and Japan is not inconsistent with exchange rate volatility implied by consumption-smoothing behavior
Physical Description:56 pages
ISBN:9781451853049

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