Productivity, Preferences and UIP deviations in an Open Economy Business Cycle Model

Arnab Bhattacharjee; Jagjit S.  Chadha; Qi Sun

Productivity, Preferences and UIP deviations in an Open Economy Business Cycle Model

Arnab Bhattacharjee
, Jagjit S. Chadha
, Qi Sun

Research output: Working paper/Preprint › Working paper

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Abstract

We show that a â€¡ex-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.

Original language	English
Place of Publication	St. Andrews
Publisher	Centre for Dynamic Macroeconomic Analysis
Number of pages	55
Publication status	Published - 2008

Publication series

Name	CDMA Working Paper Series
Publisher	School of Economics and Finance, University of St. Andrews
No.	CDMA08/08

Keywords

current account dynamics
real exchange rates
incomplete markets
financial frictions

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Productivity, preferences and UIP deviations in an open economy business cycle model
Bhattacharjee, A., Chadha, J. S. & Sun, Q., 1 Jul 2010, In: Open Economies Review. 21, 3, p. 365-391 27 p.
Research output: Contribution to journal › Article › peer-review
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Productivity, Preferences and UIP deviations in an Open Economy Business Cycle Model
Bhattacharjee, A., Sun, Q. & Chadha, J. S., 2008, St. Andrews: Scottish Institute for Research in Economics , 56 p. (SIRE Discussion Papers; no. 2008-53).
Research output: Working paper/Preprint › Discussion paper

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KW - incomplete markets

KW - financial frictions

M3 - Working paper

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BT - Productivity, Preferences and UIP deviations in an Open Economy Business Cycle Model

PB - Centre for Dynamic Macroeconomic Analysis

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ER -

Productivity, Preferences and UIP deviations in an Open Economy Business Cycle Model

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Productivity, preferences and UIP deviations in an open economy business cycle model

Productivity, Preferences and UIP deviations in an Open Economy Business Cycle Model

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