The study looks at how incomplete international asset markets affect the dynamics of the real exchange rate. The researchers use a model to show that when certain types of shocks drive business cycles, the impact of incomplete asset markets is significant. They find that if investment-specific technology shocks are a key factor, the presence of incomplete markets can greatly influence the real exchange rate. This suggests that the nature of shocks, the level of financial integration between countries, and the limitations on asset trading all play a crucial role in understanding how the real exchange rate behaves during business cycles.