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Can parameter instability explain the Meese-Rogoff puzzle?

Bacchetta, Philippe; Van Wincoop, Eric; Beutler, Toni - 2009

The empirical literature on nominal exchange rates shows that the current exchange rate is often a better predictor of future exchange rates than a linear combination of macroeconomic fundamentals. This result is behind the famous Meese-Rogoff puzzle. In this paper we evaluate whether parameter...

Persistent link: https://www.econbiz.de/10003882310

Exchange rate volatility and productivity growth : the role of financial development

Aghion, Philippe; Bacchetta, Philippe; Rancière, Romain; … - 2006

This paper offers empirical evidence that real exchange rate volatility can have a signi.cant impact on the long-term rate of productivity growth, but the effect depends critically on a country's level of financial development. For countries with relatively low levels of financial development,...

Persistent link: https://www.econbiz.de/10011397245

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