TY  - BOOK
AU  - Auclert,Adrien
AU  - Rognlie,Matthew
AU  - Souchier,Martin
AU  - Straub,Ludwig
ED  - National Bureau of Economic Research.
TI  - Exchange Rates and Monetary Policy with Heterogeneous Agents: Sizing up the Real Income Channel 
T2  - NBER working paper series
PY  - 2021///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
N1  - May 2021; Hardcopy version available to institutional subscribers
N2  - Introducing heterogeneous households to a New Keynesian small open economy model amplifies the real income channel of exchange rates: the rise in import prices from a depreciation lowers households' real incomes, and leads them to cut back on spending. When the sum of import and export elasticities is one, this channel is offset by a larger Keynesian multiplier, heterogeneity is irrelevant, and expenditure switching drives the output response. With plausibly lower short-term elasticities, however, the real income channel dominates, and depreciation can be contractionary for output. This weakens monetary transmission and creates a dilemma for policymakers facing capital outflows. Delayed import price pass-through weakens the real income channel, while heterogeneous consumption baskets can strengthen it
UR  - https://www.nber.org/papers/w28872
UR  - http://dx.doi.org/10.3386/w28872
ER  -