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Can a pure real business cycle model explain the real exchange rate: the case of Ukraine

  • Onishchenko, Kateryna

    ()

    (Cardiff Business School)

Real exchange rate (RER) is an important instrument for restoring sustainable economic growth in the small open economy with large export share. RER of Ukrainian currency can be explained within the real business cycle (RBC) framework without any forms of nominal rigidities. Fitting Ukrainian quarterly data for the period of 1996:Q1-2009:Q3 into the small open economy real business cycle model and testing it by method of indirect inference shows that RER can be reproduced by RBC framework. The generated pseudo-samples for RER by method of bootstrapping allow to obtain the distribution of the best fit ARIMA(2,1,4) parameters and to show with the Wald statistics that those parameters lie within 95% confidence intervals of those estimated for bootstrapped pseudo Q parameters.

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File URL: http://patrickminford.net/wp/E2011_17.pdf
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Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2011/17.

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Length: 30 pages
Date of creation: Jun 2011
Date of revision:
Handle: RePEc:cdf:wpaper:2011/17
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  1. Maurice J. Roche & Michael J. Moore, 2009. "Solving Exchange Rate Puzzles with neither Sticky Prices nor Trade Costs," Working Papers 001, Ryerson University, Department of Economics.
  2. Giancarlo Corsetti & Luca Dedola & Sylvain Leduc, 2008. "International Risk Sharing and the Transmission of Productivity Shocks," Review of Economic Studies, Oxford University Press, vol. 75(2), pages 443-473.
  3. Balázs Égert, 2005. "Equilibrium Exchange Rates in Southeastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) Diseased?," William Davidson Institute Working Papers Series wp770, William Davidson Institute at the University of Michigan.
  4. De Grauwe, Paul & Grimaldi, Marianna, 2006. "Exchange rate puzzles: A tale of switching attractors," European Economic Review, Elsevier, vol. 50(1), pages 1-33, January.
  5. van Aarle, Bas & de Jong, Eelke & Sosoian, Robert, 2006. "Exchange rate management in Ukraine: Is there a case for more flexibility?," Economic Systems, Elsevier, vol. 30(3), pages 282-305, October.
  6. Jón Steinsson, 2008. "The Dynamic Behavior of the Real Exchange Rate in Sticky Price Models," NBER Working Papers 13910, National Bureau of Economic Research, Inc.
  7. Martinez-Garcia, Enrique & Sondergaard, Jens, 2009. "The real exchange rate in sticky-price models: does investment matter?," Bank of England working papers 368, Bank of England.
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