In the Kehoe and Midrigan (2007) model, the persistence parameter of the real exchange rate is closely related to the measure of price stickiness in the Calvo-pricing model. When we employ this view, Rogo's (1996) 3 to 5 year consensus half-life implies that rms update their prices every 18 to...

Engel (1999) computes the variance of k-differences for each time horizon us- ing the method of Cochrane (1988) in order to measure the importance of the traded goods component in U.S. real exchange rate movements. The importance of traded goods should decrease as the horizon increases if the...