Carvalho, Carlos; Nechio, Fernanda - Federal Reserve Bank of San Francisco - 2010
countries. Combined with local currency pricing, this leads sectoral real exchange rates to have heterogeneous dynamics. We show … analytically that in this economy, deviations of the real exchange rate from PPP are more volatile and persistent than in a … found in the empirical literature on aggregation and the real exchange rate. In particular, we reconcile the apparently …