Seminar: Edouard Challe, Paris School of Economics
- Date: 6 May 2025, 13:15–14:30
- Location: Ekonomikum, F433
- Type: Seminar
- Lecturer: Edouard Challe
- Organiser: Nationalekonomiska institutionen
Edouard is a Professor of Economics and Senior CNRS Researcher at the Paris School of Economics and a Research Fellow at CEPR. Previously, he has held positions at the University of Cambridge, Université Paris-Dauphine, CREST/Ecole Polytechnique (Paris) and European University Institute (Florence).
His research focuses on macroeconomic policy with household heterogeneity. His work has been published in the American Economic Review, AEJ: Macroeconomics, Journal of Economic Theory, Economic Journal, International Economic Review, European Economic Review and Quantitative Economics. He is the author of “Macroeconomic Fluctuations and Policies” (MIT Press, 2019) and an Associate Editor of the European Economic Review.
Title: The International RBC model Finally Works
Abstract: We show that incorporating market incompleteness and cyclical income risk can reconcile the predictions of an otherwise standard international real business cycle model (IRBC) with data. In particular, our model can generate a disconnect of the real exchange rate with both current and past fundamentals, in which case news about future aggregate productivity become the sole driver of exchange-rate movements. The model replicates the negative correlation between relative consumption across countries and the real exchange rate (Backus-Smith puzzle) and the fact that consumption across countries is less correlated than output (Backus-Kehoe-Kydland puzzle). It can also generate sizable deviations from Uncovered Interest-Rate Parity (Fama puzzle).