This paper presents an empirical analysis of transmission rates from exchange rate movements to import prices, across countries and product categories, in the euro area over the last fifteen years. Our results show that the transmission of exchange rate changes to import prices in the short run...

Nominal rigidities due to menu costs have become a standard element in closed economy macroeconomic modelling. The ‘New Open Economy Macroeconomics’ literature has investigated the implications of nominal rigidities in an open economy context and found that the currency in which prices are...

This Paper focuses on the pass-through of exchange rate changes into the prices of imports made by euro area countries originating outside the area. Using data on import unit values for 13 different product categories for each country, we estimate industry-specific rates of pass-through across...

This paper presents an empirical examination of the importance of hysteresis in international trade. An econometric model of export determination is developed where the presence of sunk costs causes discontinuous behaviour and hysteresis so that an individual exporter’s decision to stay in or...

How much of carry trade excess returns can be explained by the presence of disaster risk? To answer this question, we propose a simple structural model that includes both Gaussian and disaster risk premia and can be estimated even in samples that do not contain disasters. The model points to a...

The sovereign debt default and the linkages from banking and currency crisis have been rarely explored in the crisis literature. This study attempts to dive into this unexplored area by applying panel data binary choice model on a sample with 20 emerging countries having monthly observations for...

We examine the evolution of the Icelandic banking sector in its macroeconomic environment. The story culminates in the crisis of October 2008, when all three major banks in Iceland collapsed in three successive days. The country is still struggling to cope with the consequences. The paper...

We examine the mean-reverting properties of real exchange rates, by comparing the unit root properties of a group of international real exchange rates with two groups of intra-national real exchange rates. Strikingly, we find that while the international real rates taken as a group are...

This article summarizes our views on the role of an 'aggregation bias' in explaining the PPP Puzzle, in response to the several papers recently written in reaction to our initial contribution. We discuss in particular the criticisms of Imbs, Mumtaz, Ravn and Rey (2002) presented in Chen and...

Using multivariate unit root test methods, this Paper investigates the Purchasing Power Parity (PPP) hypothesis at the sectoral level across six European countries over the last seventeen years. Evidence of mean reversion toward PPP is found for the relative prices of some sectors and countries....