Exchange rate dynamics, asset market structure and the role of the ...

A
Log-linearized model
Home and foreign marginal utilities of consumption
Euler equations for home and foreign bonds
^C t = ^ t
^C t = ^ t
h
^ t = ^ t+1 + ^r t (1 v) ^Tt+1
h
^ t = ^ t+1 + ^r t (1 v ) ^Tt+1
(A1)
(A2)
i
^Tt + C ^Ct + h^ht (A3)
i
^Tt + C ^C t + h^h t (A4)
Euler equations for home and foreign labour supply
Home and Foreign q equations
l
^lt
(1 l) = ^ t + ^w t (A5)
l
^l t
(1 l ) = ^ t + ^w t (A6)
^b t
^bt 1 = (1 v) ( 1) ^T t + RS c t
^Ct + ^C
t
(A8)
^q t = ^q t+1 (1 ) + ^ t+1 ^ t + (v 1) ^T t+1 (1 (1 )) + ^ t+1 (1 (1 ))
+ C ^Ct + h^ht (A9)
^q t = ^q t+1(1 ) + ^ t+1 ^ t +
hv ^T t+1
c RSt+1
i
(1 (1 )) + ^ t+1 (1 (1 ))
+ C ^C t + h^h t (A10)
Home and Foreign MPK equations
^ t = ^A t ^k t 1 + ^l t (A11)
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