AEAweb: Journal Article Full-Text Access
Note to Institutional Subscribers: If you normally access AEAweb journal content via your university or firm's subscription and receive this page, please click
here. The most likely causes of this are a recently changed IP address, a new subscription, or the renewal of a lapsed institutional subscription. This page will stop appearing on the next synchronisation of the document delivery and authentication systems.
You may also click here for pay-per-view, Athens login and other access options .
AEA Members, please click the button below to access the login form:
Engel, Charles, and
Akito Matsumoto. 2009. "The International Diversification Puzzle When Goods Prices Are Sticky: It's Really about Exchange-Rate Hedging, Not Equity Portfolios."
,
1(2): 155-88.
Show Article Details
DOI: 10.1257/mac.1.2.155
Abstract:This paper develops a two-country monetary DSGE model in which
households choose a portfolio of home and foreign equities, and a
forward position in foreign exchange. Some nominal goods prices
are sticky. Trade in these assets achieves the same allocations as
trade in a complete set of nominal state-contingent claims in our
linearized model. When there is a high degree of price stickiness, we
show that not much equity diversification is required to replicate the
complete-markets equilibrium when agents are able to hedge foreign
exchange risk sufficiently. Moreover, temporarily sticky nominal
goods prices can have large effects on equity portfolios even when
dividend processes are very persistent. (JEL E13, F41, G11, G15)
Additional links:
Online Appendix
Authors:
Engel, Charles (U WI)
Matsumoto, Akito (IMF)
JEL Classifications:
E13: General Aggregative Models: Neoclassical
G11: Portfolio Choice; Investment Decisions
G15: International Financial Markets
F41: Open Economy Macroeconomics
If you are an AEA member and do not have an AEAweb login, please
click here.
If you would like to become an AEA member, please see our
membership page.
If you arrived at this page via a journal article link, you will be redirected to the pdf after successful login.
If your first login attempt fails, and you have recently signed up for access or have recently changed your password, you may need to wait a few moments and try again.
Please contact us at
notify@aeaweb.org with any problems or questions.
Contents of Current Issues
May 2013 AER
Spring 2013 JEP
May 2013 AEJ: Policy
May 2013 AEJ: Micro
April 2013 AEJ: Macro
April 2013 AEJ: Applied
March 2013 JEL
Virtual Field Journals
In the News:
The Huffington Post reports on a study addressing the influence of lifestyle factors on shrinking height in the elderly published in the April issue of AEJ: Applied Economics.
Michael Frakes' (Cornell Law School) article on medical liability standards from the February issue of the American Economic Review was discussed as part of a Bloomberg opinion piece on medical malpractice.
Slate Magazine recently discussed former AEA president, George Akerlof's classic behavioral research and a 2012 American Economic Review study conducted by German and Swiss researchers to explore how gifting can motivate some employees more than cash incentives do in the workplace.
Contact Us
