$/f
q =-----
P $/ P f
(real
exchange
rate)
0 -
Response to US monetary
policy contraction:
Theory: Dornbusch (1976)
1
2 3
years
Evidence: Eichenbaum-Evans (1995)
Figure 1: A stylized representation of the forward discount puzzle
ρk =
($/©0 - ($/fik
. $ f
+r 0→k - r f0→k
(forward
discount
premium)
0 —
Response to US monetary
policy contraction:
Theory: UI
k: years after shock
Evidence: EE (1995),
Faust-Rogers (2003)
Figure 2: A stylized representation of the forward discount puzzle
$/f
=---—
P $/ P f
(real
exchange
rate)
0 -
Response to foreign monetary
policy contraction:
Evidence: Grilli-Roubini (1996)
Figure 3: A stylized representation of the exchange rate puzzle
34
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