Consumption and Real Exchange Rates in Dynamic Economies with Non-Traded Goods

We examine the possibility that nontraded goods may account for several striking features of international macroeconomic data: large, persistent deviations from purchasing power parity, small correlations of aggregate consumption fluctuations across countries, and substantial international real interest rate differentials. A dynamic, exchange economy is used to show that nontraded goods in principle can account for each of these phenomena. In the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates, but we find little evidence for this relation in time series data for eight OECD countries.


Issue Date:
1993-01
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/273751
Language:
English
Total Pages:
26
JEL Codes:
F41
Series Statement:
Working Paper No. 1252




 Record created 2018-06-20, last modified 2020-10-28

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