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| Author: | Buffie, E.F. Atolia, M. |
| Title: | Exchange-rate-based stabilisation, durables consumption and the stylised facts |
| Journal: | Economic Journal
2011 : SEP, VOL. 121:555, p. 1130-1160 |
| Index terms: | exchange rates consumer durables consumption interest rates mathematical models assets |
| Language: | eng |
| Abstract: | This study shows that a model featuring durable consumer goods, imperfectly substitutable domestic and foreign assets, and poor credibility can explain the qualitative and quantitative aspects of the stylised facts attributed with exchange-rate-based stabilisation, including the huge increase in real interest rates. Following a temporary reduction in the crawl, total consumption spending increases 14-26%, the real exchange rate appreciates 20-37% and the current account deficit climbs to 10-15% of gross domestic product. Regardless of large capital inflows, the real interest rate rises from 10 to 20-100%. |
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