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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

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

Does exchange rate stability increase trade and welfare?

Bacchetta, Philippe; Van Wincoop, Eric - 1999

We develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare. An important feature of the model is deviations from purchasing power parity, caused by rigid price setting in buyers' currency. We find the following. First, exchange rate...

Persistent link: https://www.econbiz.de/10011398752

Capital flows to emerging markets : liberalization, overshooting and volatility

Bacchetta, Philippe; Van Wincoop, Eric - 1998

, if investors have incomplete information about new emerging markets, and learn over time, there can be high volatility of …

Persistent link: https://www.econbiz.de/10011398777

Higher order expectations in asset pricing

Bacchetta, Philippe; Van Wincoop, Eric - 2004

information. The main effect of this additional asset pricing term is to disconnect the price from the present value of future …

Persistent link: https://www.econbiz.de/10002743638