@techreport{NBERw14795,
 title = "Consumption and Real Exchange Rates in Professional Forecasts",
 author = "Michael B. Devereux and Gregor W. Smith and James Yetman",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "14795",
 year = "2009",
 month = "March",
 URL = "http://www.nber.org/papers/w14795",
 abstract = {Standard models of international risk sharing with complete asset markets predict a positive association between relative consumption growth and real exchange-rate depreciation across countries.  The striking lack of evidence for this link the consumption/real-exchange-rate anomaly or Backus-Smith puzzle - has prompted research on risk-sharing indicators with incomplete asset markets.  That research generally implies that the association holds in forecasts, rather than realizations. Using professional forecasts for 28 countries for 1990-2008 we find no such association, thus deepening the puzzle. Independent evidence on the weak link between forecasts for consumption and real interest rates suggests that the presence of 'hand-to-mouth' consumers may help to resolve the anomaly.},
}