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

4
3.5
3
2.5
σ T
2
1.5
1
ρ T
corr(RS, c-c*)
0.5
0
-0.5
corr(y-y*)-corr(c-c*)
-1
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
θ
Figure 2 The volatility of the terms of trade relative to GDP, the correlation between the real
exchange rate and relative consumption, the difference in the cross-country correlations between
GDP and consumption, and the first-order autocorrelation coefficient of the terms of trade for
various values of the elasticity of substitution, θ, from 0.05 to 1.00.