The Non--Monotonic Relationship between Interest Rates and Exchange Rates
We calibrate the model to match the business cycle regularities of emerging economies. We then conduct policy experiments involving the domestic interest rate and demonstrate the central result of the paper: the relationship between interest rates and exchange rates is non-monotonic. We find that increases in the interest rate up to 35% both appreciate the currency and induce a fall in the rate of currency depreciation. However, more aggressive increases in the domestic interest rate both depreciate the currency as well as increase the rate of currency depreciation. Our results provide an explanation for the inability of non-structural empirical models to find a systematic relationship.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:red:sed007:1003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.