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Monetary Regimes and Real Exchange Rates: Long-Run Evidence at the Product Level

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Abstract

Compiling a novel dataset of prices for products sold in sixteen European countries starting in 1972, we establish that monetary-regime breaks, from peg to floating regimes, increase not only the volatility of nominal exchange rates, but also the volatility of product-level real exchange rates. Our result holds for any type of products—tradables versus nontradables—although the volatility of the real exchange rates of tradables responds less to breaks than the volatility of the real exchange rates of nontradables. Overall, the law of one price is less likely to hold under floating regimes for both tradables and nontradables

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  • Jason Kim & Marco Mello & Cosimo Petracchi, 2024. "Monetary Regimes and Real Exchange Rates: Long-Run Evidence at the Product Level," CEIS Research Paper 579, Tor Vergata University, CEIS, revised 19 Jun 2024.
    • Handle: RePEc:rtv:ceisrp:579
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    1. David Roodman & James G. MacKinnon & Morten Ørregaard Nielsen & Matthew D. Webb, 2019. "Fast and wild: Bootstrap inference in Stata using boottest," Stata Journal, StataCorp LLC, vol. 19(1), pages 4-60, March.
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