Business Intelligence

Can A Pure Real Business Cycle Model Explain The Real Exchange Rate: The Case Of Ukraine

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Executive Summary

Real Exchange Rate (RER) is an important instrument for restoring sustainable economic growth in the small open economy with large export share. RER of Ukrainian currency can be explained within the Real Business Cycle (RBC) framework without any forms of nominal rigidities. Fitting Ukrainian quarterly data for the period of 1996:Q1-2009:Q3 into the small open economy real business cycle model and testing it by method of indirect inference shows that RER can be reproduced by RBC framework.

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