This paper examines the conjecture that an increase in tariffs in a flexible exchange rate regime leads to the appreciation of the local currency. We focus on the reaction of the exchange rate market to tweets by US President Donald Trump regarding possible tariff increases on Canadian and...

Understanding and predicting the evolution of exports after a change in the nominal exchange rate is of central importance in international economics. Most of the literature focuses on estimating this relationship by reduced form, with the aim of uncovering a single structural parameter, but...

The classical dichotomy predicts that all of the time-series variance in the aggregate real exchange rate is accounted for by non-traded goods in the consumer price index (CPI) basket because traded goods obey the Law of One Price. In stark contrast, Engel (1999) claimed the opposite: that...