This paper studies the evidence on the conditional covariances between the German wholesale price level and the Deutsche mark exchange rate in the short run and in the long run. I rely both on an unrestricted time-series model, and on a structural Mussa-Dornbusch model. The results from...

This paper estimates simultaneously dynamic equations for the Deutsche Mark/Dollar exchange rate and the German wholesale price index, which emerge from a model in which German prices are sticky. This stickiness is due to price adjustment costs which take the form posited by Rotemberg(1982).The...