The long and persistent swings in the real exchange rate have for a long time puzzled economists. Recent models built on imperfect knowledge economics seem to provide a theoretical explanation for this persistence. Empirical results, based on a cointegrated vector autoregressive (CVAR) model,...

In this paper, the empirical analysis finds that the dynamics of inflation and unemployment can be described by a Phillips curve when allowing for a positive co-movement between trend-adjusted productivity and unemployment. This suggests that improvements in productivity have been achieved by...