TY  - JOUR
AU  - Stockman,Alan C.
AU  - Dellas,Harris
TI  - The Roles of the Terms of Trade and Nontraded-Good-Prices in Exchange Rate Variations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1342
PY  - 1989
Y2  - December 1989
UR  - http://www.nber.org/papers/w1342
L1  - http://www.nber.org/papers/w1342.pdf
N1  - Author contact info:
Alan C. Stockman
Department of Economics
University of Rochester
Rochester, NY  14627-0156
Tel: 585/275-7214
Fax: 585/256-2309
E-Mail: N/A user is deceased

Harris Dellas
Department of Economics
University of Bern
VWI, Schanzeneckstrasse 1
CH 3012 Bern
Switzerland
E-Mail: harris.dellas@vwi.unibe.ch
AB  - This paper demonstrates that disturbances to supplies or demands for internationally traded goods affect exchange-rates differently than do disturbances in markets for nontraded goods. The paper develops a stochastic two-country equilibrium model of exchange rates, asset prices, and goods prices, with two internationally traded goods and a nontraded good in each country. Optimal portfolios differ across countries because of differences in consumption bundles. Changes in exchange-rates, asset prices, and goods prices occur in response to underlying disturbances to supplies and demands for goods. We examine the ways in which responses of the exchange-rate are related to parameters of tastes and production shares, and we discuss conditions under which these exchange-rate responses are "large" compared to the responses of ratios of nominal price indexes.
ER  -