02104cas a2200325 a 4500 AALejournalIMF011618 230101c9999 xx r poo 0 0eng d 5.00 USD 9781463931186 1018-5941 BD-DhAAL BD-DhAAL Rabanal, Pau. Can International Macroeconomic Models Explain Low-Frequency Movements of Real Exchange Rates? / Pau Rabanal, Juan Rubio-Ramirez. Washington, D.C. : International Monetary Fund, 2012. 1 online resource (42 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Real exchange rates exhibit important low-frequency fluctuations. This makes the analysis of real exchange rates at all frequencies a more sound exercise than the typical business cycle one, which compares actual and simulated data after the Hodrick-Prescott filter is applied to both. A simple two-country, two-good model, as described in Heathcote and Perri (2002), can explain the volatility of the real exchange rate when all frequencies are studied. The puzzle is that the model generates too much persistence of the real exchange rate instead of too little, as the business cycle analysis asserts. Finally, we show that the introduction of adjustment costs in production and in portfolio holdings allows us to reconcile theory and this feature of the data. Mode of access: Internet Cost Function imf International Business Cycles imf Standard Deviation imf U.S. Dollar imf WP imf United States imf Rubio-Ramirez, Juan. IMF Working Papers; Working Paper ; No. 2012/013 Full text available on IMF http://elibrary.imf.org/view/journals/001/2012/013/001.2012.issue-013-en.xml IMF e-Library