Chernov, Mikhail; Haddad, Valentin; Itskhoki, Oleg - National Bureau of Economic Research - 2024
Financial markets play two roles with implications for the exchange rate: they accommodate risk sharing and act as a … explaining exchange rate dynamics. However, we demonstrate that this is not necessarily the case. We develop an analytical … markets can accommodate a significant extent of international risk sharing without leading to the classic exchange rate …