NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Earl Grinols

Department of Economics
University of Illinois
330 Commerce West Building
Champaign, IL 61820
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E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Baylor University

NBER Working Papers and Publications

March 1991Stochastic Equilibrium and Exchange Rate Determination in a Small Open Economy with Risk Averse Optimizing Agents
with Stephen J. Turnovsky: w3651
This paper constructs a stochastic general equilibrium model of a small open economy consisting of risk averse optimizing agents. The stochastic processes describing the rate of monetary growth, government expenditure, private production, and the foreign price level are taken to be exogenous, determining all asset risks and returns, and the equilibrium stochastic processes describing the domestic inflation rate and the exchange rate. The model is used to examine a number of issues. These include: (i) the effects of the means and variances of policy shocks on the equilibrium; (ii) the determinants of the foreign exchange risk premium; (iii) the relationship between net export instability and economic growth.

Published: Grinols, Earl L. and Stephen J. Turnovsky. "Exchange Rate Determination And Asset Prices In A Stochastic Small Open Economy," Journal of International Economics, 1994, v36(1/2), 75-97.

 
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