Gente, Karine; Leon-Ledesma, Miguel - In: The Journal of International Trade & Economic Development 15 (2006) 4, pp. 441-467
We analyze the consequences of US real interest rate rises on the real exchange rate (RER) in a two-good overlapping generations model of a semi-small open economy. The equilibrium RER depreciates (appreciates) when the world interest rate increases in a debtor (creditor) country. We then study...