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A General Equilibrium Model with Real Exchange Rates

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  • Leonardo Tariffi

    (University of Barcelona)

Abstract

I first write a partial equilibrium model “á la Rogoff†where there are relative prices of non-tradable goods in terms of prices of tradables goods. I find that the behaviour of the real exchange rate shows structural breaks in the short term. Secondly, I explain that any change in the real exchange rate is transitory in the long run. I obtain a general equilibrium model after I add a utility function to the partial-equilibrium model. In the general equilibrium model, an increase occurring in consumption of tradables is going to keep the RER constant over the time.

Suggested Citation

  • Leonardo Tariffi, 2024. "A General Equilibrium Model with Real Exchange Rates," UB School of Economics Working Papers 2024/476, University of Barcelona School of Economics.
    • Handle: RePEc:ewp:wpaper:476web
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    File URL: https://hdl.handle.net/2445/217381
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    References listed on IDEAS

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    1. Jordi Galí & Tommaso Monacelli, 2016. "Understanding the Gains from Wage Flexibility: The Exchange Rate Connection," American Economic Review, American Economic Association, vol. 106(12), pages 3829-3868, December.
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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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