Are quantitatively important real rigidities present in the data? The answer appears to depend on what data one looks at. Recent studies using price data underlying US CPI index provide evidence suggesting a limited role for real rigidities. Evidence from international prices, however, points...

Adjustment primarily occurred through existing importers and exporters changing their product mix. This implies that the macroeconomic impact of such rapid external adjustment does not come from the two channels most focused on in the literature: it does not result from the reallocation of...