Exchange Rate Disconnect in General Equilibrium

We propose a dynamic general equilibrium model of exchange rate determination that accounts for all major puzzles, including Meese-Rogoff, Backus-Smith, purchasing power parity, and uncovered interest parity puzzles. build on standard international real business cycle with home bias in consumption, augmented shocks the financial market result volatile near-martingale behavior rates ensure their empirically relevant comovement macroeconomic variables, both nominal real. Combining conventional productivity monetary allows to reproduce disconnect properties without compromising fit moments.