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Intermediary-Determined Exchange Rates

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주제분류경영학

초록

This paper focused on the exchange rate disconnect puzzle in a two-country DSGE framework that features a financial intermediation sector. An intermediary is subject to two types of financing constraints: 1. a segmented deposit market restricted to local households, and 2. a balance-sheet constraint. These two constraints drive a wedge between marginal decisions of home and foreign intermediaries, which in turn, break the link between exchange rates and consumption differences in the Backus-Smith relationship. In contrast to traditional models which find a tight link between exchange rate growth and the consumption growth rate differential, the calibrated model produced a correlation of around -0.25, reconciling the model with the empirical evidence.

Abstract

This paper focused on the exchange rate disconnect puzzle in a two-country DSGE framework that features a financial intermediation sector. An intermediary is subject to two types of financing constraints: 1. a segmented deposit market restricted to local households, and 2. a balance-sheet constraint. These two constraints drive a wedge between marginal decisions of home and foreign intermediaries, which in turn, break the link between exchange rates and consumption differences in the Backus-Smith relationship. In contrast to traditional models which find a tight link between exchange rate growth and the consumption growth rate differential, the calibrated model produced a correlation of around -0.25, reconciling the model with the empirical evidence.

참고문헌 (47)

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