Consumption and real exchange rates with incomplete markets and non-traded goods
By: Gianluca Benigno and Christoph Thoenissen
Contributors: Thoenissen, Christoph.; London School of Economics and Political Science. Centre for Economic Performance.
Series: CEP discussion paper -- no. 771
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Published: 2006
Place of publication: London
Language: eng
Format: Electronic resource
Description: This paper addresses the consumption-real exchange rate anomaly. International real business cycle models based on complete financial markets predict a unitary correlation between the real exchange rate and the ratio of home to foreign consumption when subjected to supply side shocks. In the data, this correlation is usually small and often negative. This paper shows that this anomaly can be successfully addressed by models that have an incomplete financial market structure and a non-traded as well as traded goods production sector.
Notes: Title from publisher's abstract page (viewed on June 22, 2007).

"December 2006."

Includes bibliographical references.

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