This paper revisits the sticky-price pricing-to-market model of Devereux and Engel [Devereux, M.B., Engel, C., 2003. Monetary policy in the open economy revisited: price setting and exchange-rate flexibility. Review of Economic Studies 70(4), 765-783], in which fixed exchange rates are optimal...

Empirical evidence suggests that movements in international relative prices (such as the real exchange rate) are large and persistent. Nontraded goods, both in the form of final consumption goods and as an input into the production of final tradable goods, are an important aspect behind...

Substantial attention has been devoted to inflation differentials within the European Monetary Union, including suggestions that inflation differentials are a policy issue for national governments. This paper investigates the ability of a region participating in a currency union to affect its...

We develop a general equilibrium model of a two-region currency union. There are two types of goods: non-trade goods, and traded goods for which markets are segmented. Monetary policy is set by a central monetary authority and is non-neutral due to nominal price rigidities. Fiscal policy is...

Lack of comprehensive sectoral productivity data across a large set of countries has turned researchers to structural analysis using detailed international price data to infer cross country productivity at the sector level. Because the relative price of services is higher in rich than in poor...