Does Exchange Rate Risk Matter for Welfare

摘要: Volatility in exchange rates is a prominent feature of open economies, fact which has motivated elaborate attempts many countries at rate management. This paper analyzes quantitatively the welfare effects risk general two-country environment. It finds that uncertainty tend to be small for types simplified cases considered past literature. But it identifies other cases, not previously, these can significantly larger. These include habit persistence, where agents are more sensitive risk, and also incomplete asset market structures allow asymmetries between countries. The latter case suggests hosts an international reserve currency, such as U.S. or members euro zone, may accrue