Cova, Pietro; Rebucci, Alessandro; Matsumoto, Akito; … - International Monetary Fund (IMF) - 2008
We study exchange rate and equity price dynamics, in general equilibrium, in the presence of news shocks about future … persistent underlying processes generate volatile asset prices. In addition, we show that the correlation between exchange rate … to productivity shocks. The model we set up does well at matching second moments of exchange rate and equity returns for …