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Volatility and persistence of simulated DSGE real exchange rates

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  • Ahmad, Yamin
  • Lo, Ming Chien
  • Mykhaylova, Olena

Abstract

We investigate the time series properties of both filtered and unfiltered real exchange rate series produced by DSGE models that feature local currency pricing, home bias, nontraded goods, and incomplete markets. Detrended series produced by several specifications approach the empirically observed volatility, although none of the models generates enough persistence. Conversely, several models produce unfiltered series that possess the same degree of persistence as the data, but none can match its volatility.

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  • Ahmad, Yamin & Lo, Ming Chien & Mykhaylova, Olena, 2013. "Volatility and persistence of simulated DSGE real exchange rates," Economics Letters, Elsevier, vol. 119(1), pages 38-41.
    • Handle: RePEc:eee:ecolet:v:119:y:2013:i:1:p:38-41
    DOI: 10.1016/j.econlet.2012.12.032
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Volatility, Persistence and Nonlinearity of Simulated DSGE Real Exchange Rates
      by Christian Zimmermann in NEP-DGE blog on 2011-08-21 03:22:48

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    More about this item

    Keywords

    Volatility; Persistence; Real exchange rate dynamics; DSGE modeling;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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