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- W2227832917 abstract "We propose a fully flexible, complete-market model of the international business cycle that is consistent with two major empirical facts: positive cross-country co-movement of economic aggregates and a negative correlation between the real exchange rate and relative consumption (the Backus-Smith puzzle). The model features non-tradable goods, zero wealth effects on labour supply, imperfect substitutability of capital across sectors and variable capacity utilisation. The latter can generate strong Balassa-Samuelson effects that drive a low consumption-real exchange rate correlation. Cyclical movements across countries are also positively correlated. The novelty of our paper is to introduce changes in expectations (news-shocks) as an explanation to the Backus-Smith puzzle through the wealth effects of future changes in income, while being consistent with expectations-driven economic expansions." @default.
- W2227832917 created "2016-06-24" @default.
- W2227832917 creator A5017366443 @default.
- W2227832917 date "2013-07-01" @default.
- W2227832917 modified "2023-09-27" @default.
- W2227832917 title "News Shocks, Real Exchange Rates and International Co-Movements" @default.
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