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Aggregation and the PPP puzzle in a sticky-price model

Carvalho, Carlos; Nechio, Fernanda - Federal Reserve Bank of San Francisco - 2010

We study the purchasing power parity (PPP) puzzle in a multi-sector, two-country, sticky- price model. Across sectors, firms differ in the extent of price stickiness, in accordance with recent microeconomic evidence on price setting in various countries. Combined with local currency pricing,...

Persistent link: https://www.econbiz.de/10008489226

The micro-macro disconnect of purchasing power parity

Bergin, Paul R.; Glick, Reuven; Wu, Jyh-Lin - Federal Reserve Bank of San Francisco - 2010

relative prices in microeconomic data is much faster. This paper finds that adjustment to the law of one price in disaggregated … qualitatively distinct process, working through adjustment in local-currency goods prices. These distinct adjustment dynamics appear … nesting aggregate and disaggregated relative prices permits identification of distinct macroeconomic and good-specific shocks …

Persistent link: https://www.econbiz.de/10008504593

Exploring the role of the real exchange rate in Australian monetary policy

Dennis, Richard - Federal Reserve Bank of San Francisco - 2002

An important issue in small open-economies is whether policymakers should respond to exchange rate movements when they formulate monetary policy. Micro-founded models tend to suggest that there is little to be gained from responding to exchange rate movements, and the literature has largely...

Persistent link: https://www.econbiz.de/10010702125

Endogenous nontradability and macroeconomic implications

Bergin, Paul R.; Glick, Reuven - Federal Reserve Bank of San Francisco - 2005

into international market integration and the behavior of international relative prices. As one example, it provides a … margin forms a link holding together the prices of traded and nontraded goods. The paper goes on to find that endogenizing …

Persistent link: https://www.econbiz.de/10010702140

Optimal simple targeting rules for small open economies

Dennis, Richard - Federal Reserve Bank of San Francisco - 2000

This paper solves for optimal policy rules in a stylized small open economy model under a spectrum of targeting regimes. These policy reaction functions are presented as feedback rules highlighting the dominant state variables in each rule. Optimal simple rules - rules that exploit a reduced...

Persistent link: https://www.econbiz.de/10010702175

Currency boards, dollarized liabilities, and monetary policy credibility

Valderrama, Diego; Spiegel, Mark M. - Federal Reserve Bank of San Francisco - 2003

The recent collapse of the Argentine currency board raises new questions about the desirability of formal fixed exchange rate regimes in modern developing economies. This paper examines the impact of dollarized liabilities with potential default for a currency board with costly abandonment. We...

Persistent link: https://www.econbiz.de/10010702238

Mussa redux and conditional PPP

Bergin, Paul R.; Glick, Reuven; Wu, Jyh-Lin - Federal Reserve Bank of San Francisco - 2012

Long half-lives of real exchange rates are often used as evidence against monetary sticky price models. In this study we show how exchange rate regimes alter the long-run dynamics and half-life of the real exchange rate, and we recast the classic defense of such models by Mussa (1986) from an...

Persistent link: https://www.econbiz.de/10011026947

Could capital gains smooth a current account rebalancing?

Cavallo, Michele; Tille, Cédric - Federal Reserve Bank of San Francisco - 2006

A narrowing of the U.S. current account deficit through exchange rate movements is likely to entail a substantial depreciation of the dollar, as stressed in the widely cited contribution by Obstfeld and Rogoff (2005). We assess how the adjustment is affected by the high degree of international...

Persistent link: https://www.econbiz.de/10005361475

The adjustment of global external balances: does partial exchange rate pass-through to trade prices matter?

Gust, Christopher; Leduc, Sylvain; Sheets, Nathan - Federal Reserve Bank of San Francisco - 2008

This paper assesses whether partial exchange rate pass-through to trade prices has important implications for the …

Persistent link: https://www.econbiz.de/10005361483

Pegged exchange rate regimes -- a trap?

Aizenman, Joshua; Glick, Reuven - Federal Reserve Bank of San Francisco - 2005

This paper studies the empirical and theoretical association between the duration of a pegged exchange rate and the cost experienced upon exiting the regime. We confirm empirically that exits from pegged exchange rate regimes during the past two decades have often been accompanied by crises, the...

Persistent link: https://www.econbiz.de/10005361485