Exchange rate dynamics, asset market structure and the role of the ...
Exchange rate dynamics, asset market structure and the role of the ...
Exchange rate dynamics, asset market structure and the role of the ...
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4<br />
3.5<br />
3<br />
2.5<br />
σ T<br />
2<br />
1.5<br />
1<br />
ρ T<br />
corr(RS, c-c*)<br />
0.5<br />
0<br />
-0.5<br />
corr(y-y*)-corr(c-c*)<br />
-1<br />
0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2<br />
θ<br />
Figure 1 The volatility <strong>of</strong> <strong>the</strong> terms <strong>of</strong> trade relative to GDP, <strong>the</strong> correlation between <strong>the</strong> real<br />
exchange <strong>rate</strong> <strong>and</strong> relative consumption, <strong>the</strong> difference in <strong>the</strong> cross-country correlations between<br />
GDP <strong>and</strong> consumption, <strong>and</strong> <strong>the</strong> first-order autocorrelation coefficient <strong>of</strong> <strong>the</strong> terms <strong>of</strong> trade for<br />
various values <strong>of</strong> <strong>the</strong> elasticity <strong>of</strong> substitution, θ, from 0.05 to 2.00.