This paper develops an empirical model of bilateral exchange rate volatility. We conjecture that for developing economies, external financial liabilities have an important effect on desired bilateral exchange rate volatility, above and beyond the standard Optimal Currency Area (OCA) factors. By...

This paper explores the hypothesis that high volatility of real and nominal exchange rates may be due to the fact that local currency pricing eliminates the pass-through from changes in exchange rates to consumer prices. Exchange rates may be highly volatile because in a sense they have little...

We investigate the behavior of long-run U.S./U.K. real exchange rate from 1885 to 1995.

This study measures the proportion of U.S. exchange rate movements that can be accounted for by movements in relative prices of non-traded goods.

Economic agents undertake actions to protect themselves from sort-run impact of foreign exchange rate fluctuations: Nominal goods prices are set in consumer' currencies and firms hedge foreign exchange risk. A model is presented here which shows that these features of the economy can lead to...

Recent tests using long data series find evidence in favor of long-run PPP (by rejecting either the null hypothesis of unit roots in real exchange rates and relative prices.)