{
  "title": "Real Interest Rates, Real Exchange Rates, and Net Foreign Assets in the Adjustment Process",
  "publication": "IMF Working Papers, December 1, 1995",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/real-interest-rates-real-exchange-rates-and-net-foreign-assets-in-the-adjustment-process-1958",
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  "summary": "This paper analyzes the recent behavior of real exchange rates, the trade balance and the net foreign asset position of the United States in an intertemporal optimizing model of the world economy that incorporates heterogeneity across countries and imperfect international capital and good markets.",
  "sections": [
    {
      "heading": "Research question and model setup",
      "content": "- Analyzes the recent behavior of real exchange rates, the trade balance and the net foreign asset position of the United States.  \n- Uses an intertemporal optimizing model of the world economy that incorporates:  \n  - heterogeneity across countries, and  \n  - imperfect international capital and goods markets."
    },
    {
      "heading": "Key findings",
      "content": "- The model successfully tracks the dynamics of:  \n  - trade balances, and  \n  - net foreign assets.  \n- The model generates:  \n  - too much consumption smoothing, and  \n  - excessively volatile relative prices.  \n- A core tension identified:  \n  - The elasticity of substitution between tradables and nontradables affects in opposite ways the degree of consumption smoothing and the volatility of relative prices, making it difficult to resolve both shortcomings simultaneously."
    },
    {
      "heading": "Subjects and thematic coverage",
      "content": "- Consumption  \n- External position  \n- Financial services  \n- Foreign assets  \n- Foreign currency exposure  \n- Foreign exchange  \n- Money  \n- National accounts  \n- Real exchange rates  \n- Real interest rates"
    },
    {
      "heading": "Keywords (as listed)",
      "content": "- adjustment mechanism, Consumption, consumption smoothing, consumption-GDP correlation, equilibrium price, exchange rate, exchange rate correlation, Foreign assets, Foreign currency exposure, goods market, nontradable goods, output series, Real exchange rates, real interest rate, Real interest rates, standard deviation, time series, trade balance, traded goods, United States trade balance, WP\n\nIMF Working Papers — Real Interest Rates, Real Exchange Rates, and Net Foreign Assets in the Adjustment Process (Working Paper No. 1995/129).\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/real-interest-rates-real-exchange-rates-and-net-foreign-assets-in-the-adjustment-process-1958"
    }
  ],
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    "Authors: Thomas Helbling, Bart Turtelboom",
    "Published: December 1, 1995",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451934731.001",
    "Analyzes the recent behavior of real exchange rates, the trade balance and the net foreign asset position of the United States.",
    "Uses an intertemporal optimizing model of the world economy that incorporates:",
    "The model successfully tracks the dynamics of:",
    "The model generates:",
    "A core tension identified:",
    "Consumption",
    "External position",
    "Financial services",
    "Foreign assets",
    "Foreign currency exposure",
    "Foreign exchange",
    "Money",
    "National accounts",
    "Real exchange rates",
    "Real interest rates",
    "adjustment mechanism, Consumption, consumption smoothing, consumption-GDP correlation, equilibrium price, exchange rate, exchange rate correlation, Foreign assets, Foreign currency exposure, goods market, nontradable goods, output series, Real exchange rates, real interest rate, Real interest rates, standard deviation, time series, trade balance, traded goods, United States trade balance, WP"
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