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Incomplete information processing : a solution to the forward discount puzzle

Bacchetta, Philippe; Van Wincoop, Eric - 2005

managed, we investigate to what extent incomplete information processing can explain this puzzle. Two types of incompleteness … are considered: infrequent and partial information processing. We calibrate a two-country general equilibrium model to the … data and show that incomplete information processing can fully match the empirical evidence. It can also account for …

Persistent link: https://www.econbiz.de/10011397256

A scapegoat model of exchange rate fluctuations

Bacchetta, Philippe; Van Wincoop, Eric - 2004

of the exchange rate with noisy rational expectations, where investors have heterogeneous information on some structural …

Persistent link: https://www.econbiz.de/10011397704

Can information heterogeneity explain the exchange rate determination puzzle?

Bacchetta, Philippe; Van Wincoop, Eric - 2003

introduce symmetric information dispersion about future fundamentals in a dynamic rational expectations model in order to …

Persistent link: https://www.econbiz.de/10011397717

Why do consumer price react less than import prices to exchange rates?

Bacchetta, Philippe; Van Wincoop, Eric - 2002

It is well-known that the extent of pass-through of exchange rate changes to consumer prices is much lower than to import prices. One explanation is local distribution costs. Here we consider an alternative, complementary, explanation based on the optimal pricing strategies of firms. We consider...

Persistent link: https://www.econbiz.de/10011397767

A theory of the currency denomination of international trade

Bacchetta, Philippe; Van Wincoop, Eric - 2001

Nominal rigidities due to menu costs have become a standard element in closed economy macroeconomic modeling. The "New Open Economy Macroeconomics" literature has investigated the implications of nominal rigidities in an open economy context and found that the currency in which prices are set...

Persistent link: https://www.econbiz.de/10011397852

A corporate balance-sheet approach to currency crises

Aghion, Philippe; Bacchetta, Philippe; Banerjee, Abhijit V. - 2001

This paper presents a general equilibrium currency crisis model of the "third generation", in which the possibility of currency crises is driven by the interplay between private firms' credit-constraints and nominal price rigidities. Despite our emphasis on microfoundations, the model remains...

Persistent link: https://www.econbiz.de/10011397891

Trade flows, prices, and the exchange rate regime

Bacchetta, Philippe; Van Wincoop, Eric - 2000

This paper examines the relationship between the exchange rate regime and trade flows using a general equilibrium model based on Bacchetta and van Wincoop (AER, 2000). We show that in general the link between trade and the exchange rate regime is ambiguous and that it depends in particular on...

Persistent link: https://www.econbiz.de/10011398263

Currency crises and monetary policy in an economy with credit constraints

Aghion, Philippe; Bacchetta, Philippe; Banerjee, Abhijit V. - 2000

This paper presents a simple model of currency crises which is driven by the interplay between the credit constraints of private domestic firms and the existence of nominal price rigidities. The possibility of multiple equilibria, including a "currency crisis" equilibrium with low output and a...

Persistent link: https://www.econbiz.de/10011398300

A simple model of monetary policy and currency crises

Aghion, Philippe; Bacchetta, Philippe; Banerjee, Abhijit V. - 1999

This paper analyzes the optimal interest rate policy in currency crises. Firms are credit constrained and have debt in domestic and foreign currency, a situation that may easily lead to a currency crisis. An interest rate increase has an ambiguous effect on firms since it both makes more...

Persistent link: https://www.econbiz.de/10011398630

Capital markets and the instability of open economies

Aghion, Philippe; Bacchetta, Philippe; Banerjee, Abhijit V. - 2000

This paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies. Our basic model is a dynamic open economy model with one tradeable and one non-tradeable good with the non-tradeable being an input to the production of the...

Persistent link: https://www.econbiz.de/10011398740