Three well known facts that characterize exchange rate data are: (a) the high correlation between bilateral nominal and real exchange rates; (b) the high degree of persistence in real exchange rate movements; and (c) the high volatility of real exchange rates. This paper attempts a joint, albeit...

This paper studies a two country model with traded and nontraded sectors, in which sector-specific capital goods, as in practice, are produced by combining inputs from all sectors. The model also includes nontraded distribution services employed in retailing traded goods to consumers. The...