TY  - BOOK
AU  - Burnside,A.Craig
AU  - Graveline,Jeremy J.
ED  - National Bureau of Economic Research.
TI  - On the Asset Market View of Exchange Rates
T2  - NBER working paper series
PY  - 2012///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - December 2012; Hardcopy version available to institutional subscribers
N2  - If the asset market is complete then the difference between foreign and domestic agents' log intertemporal marginal rates of substitution (IMRSs) equals the log change in the real exchange rate. This equation is frequently used to argue that changes in real exchange rates reflect differences between agents' required compensation for exposure to asset return uncertainty. We show that the relative returns on frictionlessly traded assets are only reflected in the common component of agents' IMRSs, not differences. Instead, when this equation does offer insights, frictions in the goods market are the source of economic distinction between agents
UR  - https://www.nber.org/papers/w18646
UR  - http://dx.doi.org/10.3386/w18646
ER  -