SFB 303 Discussion Paper No. A - 97

Author: Neumann, Manfred J. M., and Jürgen von Hagen
Title: Relative Price Risk in an Open Economy with Flexible Exchange Rates
Abstract: This paper analyses the determinants of relative price risk for an open multi-markets economy where agents observe local prices and a global flexible exchange rate. Estimates with German data (1973 - 1985) confirm (i) that relative price risks is a positive function of domestic monetary disturbances and of nominal and real exchange rate shocks, and (ii) that aggregate output is negatively affected by relative price risk.
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Creation-Date: February 1987
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