03268nam 2200625Ia 450 991082180290332120200520144314.01-4623-4879-31-4527-4408-41-283-51766-397866138301111-4519-8792-7(CKB)3360000000443937(EBL)3014352(SSID)ssj0000940754(PQKBManifestationID)11532939(PQKBTitleCode)TC0000940754(PQKBWorkID)10955567(PQKB)11018576(OCoLC)698585560(IMF)WPIEE2006177(MiAaPQ)EBC3014352(EXLCZ)99336000000044393720070106d2006 uf 0engur|n|---|||||txtccrEuro-dollar real exchange rate dynamics in an estimated two-country model what is important and what is not /prepared by Pau Rabanal and Vicente Tuesta1st ed.[Washington, D.C.] International Monetary Fund20061 online resource (42 p.)IMF working paper ;WP/06/177"July 2006."1-4518-6437-X Includes bibliographical references.""Contents""; ""I. INTRODUCTION""; ""II. THE MODEL""; ""III. EXTENSIONS TO THE BASELINE MODEL ""; ""IV. ESTIMATION AND MODEL COMPARISON""; ""V. RESULTS""; ""VI. CONCLUDING REMARKS""; ""APPENDIX: THE METROPOLIS-HASTINGS ALGORITHM""; ""REFERENCES""We use a Bayesian approach to estimate a standard two-country New Open Economy Macroeconomics model using data for the United States and the euro area, and we perform model comparisons to study the importance of departing from the law of one price and complete markets assumptions. Our results can be summarized as follows. First, we find that the baseline model does a good job in explaining real exchange rate volatility but at the cost of overestimating volatility in output and consumption. Second, the introduction of incomplete markets allows the model to better match the volatilities of all real variables. Third, introducing sticky prices in Local Currency Pricing improves the fit of the baseline model but does not improve the fit as much as introducing incomplete markets. Finally, we show that monetary shocks have played a minor role in explaining the behavior of the real exchange rate, while both demand and technology shocks have been important.IMF working paper ;WP/06/177.Euro-dollar marketEconometric modelsForeign exchange ratesUnited StatesEconometric modelsForeign exchange ratesEuropean Union countriesEconometric modelsEuro-dollar marketEconometric models.Foreign exchange ratesEconometric models.Foreign exchange ratesEconometric models.Rabanal Pau1627816Tuesta Vicente1627814MiAaPQMiAaPQMiAaPQBOOK9910821802903321Euro-Dollar Real Exchange Rate Dynamics in an Estimated Two-Country Model4010806UNINA