A central puzzle in international macroeconomics is that observed real exchange rates are highly volatile. Standard International Real Business Cycle (IRBC) models cannot reproduce this fact when calibrated using conventional parameterizations, and can only generate one fourth of the real...

This paper estimates and compares four versions of the New Keynesian model with nominal rigidities using a Bayesian approach. Our empirical results are as follows. First, the authors find that adding price indexation improves the fit of Calvo's (1983) model. Second, models with both staggered...