The Roles of the Terms of Trade and Nontraded-Good-Prices in Exchange Rate Variations / Alan C. Stockman, Harris Dellas.

By:

Stockman, Alan C

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w1342.Publication details: Cambridge, Mass. National Bureau of Economic Research 1984.Description: 1 online resource: illustrations (black and white)Subject(s):

F - International Economics

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Abstract: This paper demonstrates that disturbances to supplies or demands for internationally traded goods affect exchange-rates differently than do disturbances in markets for nontraded goods. The paper develops a stochastic two-country equilibrium model of exchange rates, asset prices, and goods prices, with two internationally traded goods and a nontraded good in each country. Optimal portfolios differ across countries because of differences in consumption bundles. Changes in exchange-rates, asset prices, and goods prices occur in response to underlying disturbances to supplies and demands for goods. We examine the ways in which responses of the exchange-rate are related to parameters of tastes and production shares, and we discuss conditions under which these exchange-rate responses are "large" compared to the responses of ratios of nominal price indexes.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w1342 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

May 1984.

This paper demonstrates that disturbances to supplies or demands for internationally traded goods affect exchange-rates differently than do disturbances in markets for nontraded goods. The paper develops a stochastic two-country equilibrium model of exchange rates, asset prices, and goods prices, with two internationally traded goods and a nontraded good in each country. Optimal portfolios differ across countries because of differences in consumption bundles. Changes in exchange-rates, asset prices, and goods prices occur in response to underlying disturbances to supplies and demands for goods. We examine the ways in which responses of the exchange-rate are related to parameters of tastes and production shares, and we discuss conditions under which these exchange-rate responses are "large" compared to the responses of ratios of nominal price indexes.