Consumption and real exchange rates in professional forecasts / Michael B. Devereux, Gregor W. Smith, James Yetman.
Material type:
TextSeries: Working paper series (National Bureau of Economic Research) ; no. 14795.Publication details: Cambridge, Mass. : National Bureau of Economic Research, 2009Description: 28, [14] p. : ill. ; 22 cmSubject(s): Consumption (Economics) | Foreign exchange rates -- Econometric modelsLOC classification: HB1 | .N38 no. 14795Online resources: Click here to access online Summary: Standard models of international risk sharing with complete asset markets predict a positive association between relative consumption growth and real exchange-rate depreciation across countries. The striking lack of evidence for this link the consumption/real-exchange-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 resolve the anomaly.
| Item type | Current library | Collection | Call number | Copy number | Status | Date due | Barcode |
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Book
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University of Macedonia Library Βιβλιοστάσιο Β (Stack Room B) | Research Papers | HB1.N38 no. 14795 (Browse shelf (Opens below)) | 1 | Available | 0013125790 |
Includes bibliographical references.
Standard models of international risk sharing with complete asset markets predict a positive association between relative consumption growth and real exchange-rate depreciation across countries. The striking lack of evidence for this link the consumption/real-exchange-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 resolve the anomaly.
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