Central Banks that are primarily concerned with the behavior of prices will use monetary policy to insulate prices from exchange rate changes. Prices then appear unresponsive to the exchange rate. The observed relationships between prices and the exchange rate will reflect Central Bank actions...

We study the behavior of real exchange rates under various official designations of exchange rate arrangements. Examining many currencies, we find important differences across the designations. Most notably, real exchange rate mean reversion is fastest when nominal exchange rates are officially...

We suggest it may be quot;too easyquot; to attribute real exchange rate movements to law of one price deviations. We show that it is immaterial whether one uses seemingly traded goods, nontraded goods, or even just a single, unimportant consumer good, say beer. The ease of attributing the...