This paper provides an empirical assessment of the importance of sticky prices in accounting for the variations and the persistence in real exchange rates Vector autoregressions with five variables from two countries that always include the United States are estimated Restrictions are imposed to identify a global shock and two sets of country specific output shocks One set of shocks is associated with instantaneous price adjustments while the other has delayed effects on prices Data from the G7 countries reveal that US sticky price shocks are the dominant source of real exchange rate variations But these shocks have reasonably short half-lives and cannot account for the observed real exchange rate persistence Non-sticky price shocks can induce very persistent real exchange rate dynamics even though they account for little of the historical real exchange rate variations
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number
468.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Did you know? All full texts are decentralized with the publishers, none reside on this server, thus making it possible to offer this service for free to all parties.