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http://hdl.handle.net/10419/50633
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| Title: | | Productivity, preferences and UIP deviations in an open economy business cycle model  |
| Authors: | | Bhattacharjee, Arnab Chadha, Jagjit S. Sun, Qi |
| Issue Date: | | 2008 |
| Series/Report no.: | | School of Economics discussion papers 08,08 |
| Abstract: | | We show that a flex-price two-sector open economy DSGE model can explain the poor degree of international risk sharing and exchange rate disconnect. We use a suite of model evaluation measures and examine the role of (i) traded and non-traded sectors; (ii) financial market incompleteness; (iii) preference shocks; (iv) deviations from UIP condition for the exchange rates; and (v) creditor status in net foreign assets. We find that there is a good case for both traded and non-traded productivity shocks as well as UIP deviations in explaining the puzzles. |
| Subjects: | | current account dynamics real exchange rates incomplete markets financial frictions |
| JEL: | | E32 F32 F41 |
| Document Type: | | Working Paper |
| Appears in Collections: | | School of Economics Discussion Papers, University of Kent
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