We derive a real gravity equation and gain several new insights that were hidden in the nominal specification used so far. Most importantly, the real effective exchange rate (REER) of the exporter and, via the importer's terms of trade, also the importer's REER matter, and we can identify the...

Exchange rates typically exhibit time-varying patterns in both means andvariances. The histograms of such series indicate heavy tails. In thispaper we construct models which enable a decision-maker to analyze theimplications of such time series patterns for currency risk management.Our approach...

We construct models which enable a decision-maker to analyze the implications oftypical timeseries patterns of daily exchange rates for currency risk management. Ourapproach is Bayesianwhere extensive use is made of Markov chain Monte Carlo methods. The effects ofseveral modelcharacteristics...