A two-country model that incorporates many features proposed in the New Open Economy Macroeconomics literature is developed in order to replicate the volatility of the real exchange rate and its disconnect with macroeconomic variables. The model is estimated using data for the euro area and the...

This paper estimates a pricing-to-market equation for Italy over the period 1990-99 with the aim of assessing the degree of exchange rate pass-through (ERPT). As compared to previous works, we minimize aggregation and selection biases using export data on all products (about 700 from 4 digits of...

This paper builds a baseline two-country model of real and monetary transmission in the presence of optimal international price discrimination by firms. Distributing traded goods to consumers requires nontradables, intensive in local labor. Because of distributive trade the price elasticity of...