This paper examines how much the central bank should adjust the interest rate in response to real exchange rate fluctuations. The paper first demonstrates in a two-country Dynamic Stochastic General Equilibrium (DSGE) model, that the home bias in consumption is important to duplicate the...

The interaction between the exchange rate regime, trade firms' price-setting behavior, and exchange rate pass-through (ERPT) is an important topic in international economics. This paper studies this using a goods-level dataset of US-China trade prices collected by the US Bureau of Labor...

Using a unique institutional setting of dual exchange rates of Chinese currency, this paper provides novel evidence that firms manipulate trade data to evade capital controls. We develop a model showing that the trade data over-reporting is positively (negatively) correlated with the exchange...