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On Macroeconomic Implications of Price Setting in the Open Economy

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  • Fitoussi, Jean-Paul
  • Le Cacheux, Jacques

Abstract

Ever since its inception, the world system of floating exchanges rates has been characterized by large and persistent movements in currency values, both nominal and real, with apparently no tendency for purchasing power parity to assert itself either in the aggregate or on a product basis; in particular, there is growing evidence that the "law of one price" does not seem to hold even for tradables and that price-cost markups display large and persistent fluctuations. In the 1980's, these movements have been accompanied by worldwide high real interest rates and ample, long-lasting differentials, as well as persistent trade and current account imbalances on a grand scale for many countries. In addition, there has been widespread concern that expansionary policies in one large country-namely the United Statesmay have had adverse effects on others, European countries in particular (...).
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Suggested Citation

  • Fitoussi, Jean-Paul & Le Cacheux, Jacques, 1988. "On Macroeconomic Implications of Price Setting in the Open Economy," American Economic Review, American Economic Association, vol. 78(2), pages 335-340, May.
  • Handle: RePEc:aea:aecrev:v:78:y:1988:i:2:p:335-40
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    Cited by:

    1. Lucrezia Reichlin & Catherine Guillemineau, 1989. "Chômage et croissance en France et aux États-Unis. Une analyse de longue période," Revue de l'OFCE, Programme National Persée, vol. 29(1), pages 161-184.
    2. Jean-Paul Fitoussi & Jacques Le Cacheux, 1989. "Une théorie des années quatre-vingt," Revue de l'OFCE, Programme National Persée, vol. 29(1), pages 117-160.
    3. Jacques Le Cacheux & Lucrezia Reichlin, 1989. "Taux de change et prix des importations : le cas des automobiles en Europe," Revue de l'OFCE, Programme National Persée, vol. 27(1), pages 133-155.

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