IDEAS home Printed from https://ideas.repec.org/a/eee/jimfin/v153y2025ics0261560625000361.html
   My bibliography  Save this article

Rethinking the delayed overshooting puzzle: An examination through present value framework

Author

Listed:
  • Yun, Jaeho

Abstract

This paper examines the dynamic responses of real exchange rates in several developed economies to US monetary policy shocks, with a particular focus on the delayed overshooting puzzle. Using a present value model, I decompose the real exchange rate into cash flow and discount rate components and analyze their reactions to US monetary shocks identified through high-frequency identification. The empirical findings indicate that short-term real exchange rate movements are shaped by a combination of multiple exchange rate theories, calling into question the robustness of the delayed overshooting phenomenon. In contrast, long-term dynamics are primarily driven by the discount rate component. Among the three economic models considered—the Dornbusch overshooting model, the consumption-based model, and the global risk-taking channel—the behavior of real exchange rates aligns most closely with the global risk-taking channel.

Suggested Citation

  • Yun, Jaeho, 2025. "Rethinking the delayed overshooting puzzle: An examination through present value framework," Journal of International Money and Finance, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:jimfin:v:153:y:2025:i:c:s0261560625000361
    DOI: 10.1016/j.jimonfin.2025.103301
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0261560625000361
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jimonfin.2025.103301?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:153:y:2025:i:c:s0261560625000361. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30443 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.