English, Article, Journal or magazine article edition: Is the exchange rate a shock absorber or a source of shocks? New empirical evidence K. FARRANT; G. PEERSMAN

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Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Is the exchange rate a shock absorber or a source of shocks? New empirical evidence
Author
  • K. FARRANT
  • G. PEERSMAN
Physical Description
  • preprint
Notes
  • This paper analyses the role of the real exchange rate in a structural vector autoregression (sVAR) framework for the United Kingdom, Euro area, Japan and Canada vis-á-vis the United States. A new identification strategy is proposed building on sign restrictions. The results are compared to the benchmark conventional approach of Clarida and Gali (1994) based on long-run zero restrictions. Although the restrictions are derived from the same theoretical model, the results are strikingly di??erent. In contrast to the benchmark model, an important role for nominal shocks in explaining real exchange rate fluctuations is found. Hence, the exchange rate can rather be considered as a source of shocks instead of a shock absorber.
  • exchange rates, vector autoregressions
  • RePEc:rug:rugwps:05/​285
Language
  • English
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