a counterfactual world without trade frictions in manufactures. Removing these trade frictions goes a long way toward …

We introduce the real exchange rate volatility curve as a useful device to understand the role of price stickiness in … theory predicts that the real exchange rate volatility curve is a U-shaped function of the degree of price stickiness. Using … sector-level European real exchange rate data and frequency of price changes, we estimate the volatility curve. The results …

exchange rate so as to facilitate terms of trade adjustment. We show that optimal nominal exchange rate volatility will reflect … bias in production. Quantitatively, we find the optimal exchange rate volatility should be significantly less than would be … optimal exchange rate volatility may be non-monotonic …

This paper explores the hypothesis that high volatility of real and nominal exchange rates may be due to the fact that … necessary to construct such an explanation for exchange rate volatility. In addition to the presence of local currency pricing … parity. Together, it is shown that these elements can produce exchange rate volatility that is much higher than shocks to …

positively related to exchange rate volatility as well as to transportation costs. (2) Once we have controlled for these two …