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

4
3.5
3
2.5
σ T
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1.5
1
corr(RS, c-c*)
0.5
corr(T,A)
0
-0.5
corr(y,y*)-corr(c,c*)
-1
-1.5
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
θ
Figure 7 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 correlation between home country TFP and the terms of trade (as a
proxy for international shock transmission) for various values of θ in the baseline model