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

1.5
σ T
1
corr(rs, c-c*)
ρ T
0.5
corr (y-y*) - corr(c-c*)
0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
θ = τ
Figure 9c Sensitivity analysis: Same analysis as in figure 5, but here we let the elasticity of
substitution between home and foreign intermediate inputs into investment vary along with that of
final consumption goods, such that θ = τ.