Real Interest Rates and Home Goods: A Two-Period Model.
Using a simple model of a small, open economy that includes traded and nontraded goods and output in two periods, the authors demonstrate that changes in real interest rates will be associated with changes in real exchange rates. A high real interest rate will encourage consumers to substitute away from present and toward future consumption. To transfer consumption of nontraded goods intertemporally, intersectoral resource flows are required. In the simplest model, this in turn requires opposite movements in the real exchange rate over two periods. Copyright 1988 by The Economic Society of Australia.
Year of publication: |
1988
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Authors: | Hartley, Peter R ; Kyle, Albert S |
Published in: |
The Economic Record. - Economic Society of Australia - ESA, ISSN 1475-4932. - Vol. 64.1988, 186, p. 168-77
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Publisher: |
Economic Society of Australia - ESA |
Saved in:
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