IDEAS home Printed from https://ideas.repec.org/p/ags/quedwp/273681.html

Consumption and Real Exchange Rates in Professional Forecasts

Author

Listed:
  • Devereux, Michael B.
  • Smith, Gregor W.
  • Yetman, James

Abstract

Standard models of international risk sharing with complete asset markets predict a positive association between relative consumption growth and real exchange-rate depreciations across countries. The striking lack of evidence for this link — the consumption/ realexchange- rate anomaly or Backus-Smith puzzle — has prompted research on risk-sharing indicators with incomplete asset markets. That research generally implies that the association holds in forecasts, rather than realizations. Using professional forecasts for 28 countries for 1990-2008 we find no such association, thus deepening the puzzle. Independent evidence on the weak link between forecasts for consumption and real interest rates suggests that the presence of ‘hand-to-mouth’ consumers may help to explain the evidence.

Suggested Citation

  • Devereux, Michael B. & Smith, Gregor W. & Yetman, James, 2009. "Consumption and Real Exchange Rates in Professional Forecasts," Queen's Economics Department Working Papers 273681, Queen's University - Department of Economics.
    • Handle: RePEc:ags:quedwp:273681
    DOI: 10.22004/ag.econ.273681
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/273681/files/qed_wp_1195.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.273681?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:quedwp:273681. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/qedquca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.