Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 2 of 2
Full-Text Articles in Statistical Models
International Risk Sharing In Overlapping Generations Models, James Staveley-O'Carroll, Olena M. Staveley-O'Carroll
International Risk Sharing In Overlapping Generations Models, James Staveley-O'Carroll, Olena M. Staveley-O'Carroll
Economics Department Working Papers
We present a solution to the Backus-Smith puzzle that, instead of relying on extreme parameter values or complex modeling assumptions, simply switches the framework from infinitely lived agents to overlapping generations. Young agents face non-diversifiable wage risk that leads to a low degree of risk sharing within each country. Subsequently, international price movements are not sufficient to achieve the high consumption-real exchange rate correlation produced in standard infinitely lived agent DSGE models.
Nonlinearities In The Real Exchange Rates: New Evidence From Developed And Developing Countries, Yamin S. Ahmad, Ming Chien Lo, Olena M. Staveley-O'Carroll
Nonlinearities In The Real Exchange Rates: New Evidence From Developed And Developing Countries, Yamin S. Ahmad, Ming Chien Lo, Olena M. Staveley-O'Carroll
Economics Department Working Papers
This paper investigates nonlinearities in the dynamics of real exchange rates. We use Monte Carlo simulations to establish the size properties of the Teräsvirta-Anderson (1992) and the Teräsvirta (1994) test, when the dynamics of the real exchange rate is influenced by an exogenous process. In addition, we examine the modification proposed by Ahmad, Lo and Mykhaylova (2013; Journal of International Economics) to show that the modified nonlinearity test performs much better than the original in both Monte Carlo exercises and in the actual data on 1431 bilateral real exchange rate series. Finally, we investigate the dynamics of the real exchange …