This paper investigates whether oil prices have a reliable and stable out-of-sample relationship with the Canadian/U.S. dollar nominal exchange rate. Despite state-of-the-art methodologies, the authors find little systematic relation between oil prices and the exchange rate at the monthly and...

This paper documents the implications of arbitrage costs on the behavior of exchange rates in an open-economy liquidity model. The main motivation behind the paper is the growing evidence that the well-documented departures from purchasing power parity are due to a failure of the law of one...

Empirical evidence suggests that movements in international relative prices (such as the real exchange rate) are large and persistent. Nontraded goods, both in the form of final consumption goods and as an input into the production of final tradable goods, are an important aspect behind...

Dynamic open economy models with time-separable, deterministic utilities fail to account for observed dynamics of exchange rates and international relative prices and quantities. This paper examines the ability of extensions of existing open economy models to account for exchange rates,...

This paper examines monetary regime switching in Canada and the United States and the implications of regime switching for exchange rates and key nominal and real macroeconomic aggregates for the two countries. Evidence of Markov regime switching in the process governing monetary base growth and...

A central puzzle in international finance is that real exchange rates are volatile and, in stark contradiction to efficient risk-sharing, negatively correlated with relative consumptions across countries. This paper shows that a model with incomplete markets and a low price elasticity of imports...