Failures of the law of one price explain much of the variation in real C.P.I. exchange rates. We use C.P.I. data for U.S. cities and Canadian cities for 14 categories of consumer prices to examine the nature of the deviations from the law of one price. The distance between cities explains a...

We examine the factors that determine the differences in ex ante returns on equities in eleven Pacific Basin countries. Our concern is whether real return differentials are primarily caused by nominal return differentials or expected changes in real exchange rates. We find that nominal return...

We use new disaggregated data on consumer prices to determine why there is variability in prices of similar goods across U.S. cities. We address questions similar to those that have arisen in the international context: is this variability purely a result of market segmentation or do sticky...

We find evidence that the law of one price (LOOP) holds more nearly for country pairs that are within geographic regions than for country pairs that are not. These findings are established using disaggregated consumer price data from 23 countries (including data from eight North American...

This paper builds a model of adjustment toward PPP for a panel of real exchange rates. The model eliminates some inconsistencies in previous models, which implied a model for the real exchange rate of country B relative to country C that was not commensurate with the posited model of the real...

We investigate the possibility that the large current account deficits of the U.S. are the outcome of optimizing behavior. We develop a simple long-run world equilibrium model in which the current account is determined by the expected discounted present value of its future share of world GDP...

This paper proposes a new approach to identifying the effects of monetary policy shocks in an international vector autoregression. Using high-frequency data on the prices of Fed Funds futures contracts, we measure the impact of the surprise component of the FOMC-day Federal Reserve policy...

A Markov-switching model is fit for eighteen exchange rates at quarterly and monthly frequencies. This model fits well in-sample at the quarterly frequency for many exchange rates. By the mean-squared-error or mean-absolute-error criterion. the Markov model does not generate superior forecasts...

We investigate the choice of exchange-rate regime fixed or floating in a dynamic, intertemporal general equilibrium framework. Our framework extends Devereux and Engel (1998) by investigating the implications of internationalized production. We examine the role of price-setting -- whether prices...

This paper develops a two-country monetary DSGE model in which households choose a portfolio of home and foreign equities, and a forward position in foreign exchange. Some goods prices are set without full information of the state. We show that temporarily sticky nominal goods prices can have...