Using a self-exciting threshold autoregressive model, we confirm the presence of nonlinearities in sectoral real exchange rate (SRER) dynamics across Mexico, Canada and the US in the pre-NAFTA and post-NAFTA periods. Measuring transaction costs using the estimated threshold bands, we find...

Although large changes in real exchange rates have occurred during the past decades, the real implications of these movements remain an empirical question. Using detailed data from the United States, Canada, the United Kingdom, and Japan we examine the implications of exchange rates for time...

The issue of incomplete pass-through from exchange rate changes to domestic inflation has received considerable attention. Most models try to account for this by using a variety of assumptions about the costs of changing prices. These suggest complete pass-through, but only after the possible...

In this paper, the evidence for a relative tradables-nontradables price based explanation for long run movements in East Asian real exchange rates is examined. Using both time series cointegration techniques and panel regression procedures, I find that the real exchange rates are cointegrated...

We study the effect of economic openness on domestic prices by linking the quantity theory of money (QTM) with purchasing power parity (PPP). Our model pertains to long run domestic price movements, and shows that economic openness has a negative relation with QTM and a positive relation with...

This paper examines the effect of overall and sector-specific productivity shocks on the real exchange rate in small open economies. A dynamic stochastic small open economy model shows that productivity shocks impact the real exchange rate mostly through changes in the relative price of...

In an attempt to maintain a stable exchange rate and price level in Thailand given shocks from the United States, China, Euro Area, and Japan; the top five trading partners of Thailand, this study employs the system equations of VAR model techniques. Results show that the interest rates, demand...

The data show large and persistent deviations of real exchange rates from purchasing power parity. Recent work has shown that to a large extent these movements are driven by deviations from the law of one price for traded goods. In the data, real and nominal exchange rates are about 6 times as...

The PPP puzzle is based on empirical evidence that international price differences for individual goods (LOOP) or baskets of goods (PPP) appear highly persistent or even non-stationary. The present consensus is these price differences have a half-life that is of the order of five years at best,...