Real Exchange Rates and Primary Commodity Prices: Mussa Meets Backus-Smith
Peer Reviewed
Date issued
Dec 2021
Subject
Commodity Price;
Exchange Rate;
Labor Market;
Macroeconomy
JEL code
F31 - Foreign Exchange;
F41 - Open Economy Macroeconomics
Category
Working Papers
We show that explicitly modeling primary commodities in an otherwise totally standard incomplete markets open economy model can go a long way in explaining the Mussa puzzle and the Backus-Smith puzzle, two of the main puzzles in the international economics literature.
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