Logo
Munich Personal RePEc Archive

Inattentive Consumers and Exchange Rate Volatility

Mehmet Fatih, Ekinci (2010): Inattentive Consumers and Exchange Rate Volatility.

Warning
There is a more recent version of this item available.
[thumbnail of MPRA_paper_26472.pdf]
Preview
PDF
MPRA_paper_26472.pdf

Download (462kB) | Preview

Abstract

We present and study the properties of a sticky information exchange rate model where consumers and producers update their information sets infrequently. We find that introducing inattentive consumers has important implications. Through a mechanism resembling the limited participation models, we can address the exchange rate volatility for reasonable values of risk aversion. We observe more persistence in output, consumption and employment which brings us closer to the data. Impulse responses to monetary shocks are hump shaped consistent with the empirical evidence. Forecast errors of inattentive consumers provide a channel to reduce the correlation of relative consumption and real exchange rate. However, we find that decline in the correlation is quantitatively small.

Available Versions of this Item

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.