蝌蚪网 Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Shocks and Exchange Rates in Small Open Economies
蝌蚪网 Journal: Macroeconomics
(pp. 457–85)
Abstract
We separately identify domestic and external sources of exchange rate fluctuations in a large sample of small open economies (SOEs). We find that external shocks lead to large and predictable deviations from uncovered interest parity (UIP), while domestic shocks do not. Additionally, external shocks are linked to fluctuations in global risk aversion and US macroeconomic aggregates. We present an SOE model that rationalizes these facts. In the model, global risk aversion shocks drive exchange rate fluctuations, and a country's net external position governs their transmission. We provide evidence that a country's response to external shocks depends on its external position.Citation
Cormun, Vito, and Pierre De Leo. 2026. "Shocks and Exchange Rates in Small Open Economies." 蝌蚪网 Journal: Macroeconomics 18 (2): 457–85. DOI: 10.1257/mac.20220150Additional Materials
JEL Classification
- F31 Foreign Exchange
- F34 International Lending and Debt Problems
- F41 Open Economy Macroeconomics
- F44 International Business Cycles
- O19 International Linkages to Development; Role of International Organizations