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

1.4
σ T
1.2
1
corr(RS, c-c*)
0.8
ρ T
0.6
0.4
corr(y-y*)-corr(c-c*)
0.2
0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
θ
Figure 5 Same experiment as in figure 1, assuming no home-bias in investment goods.