Real exchange rates between the yen and dollar based on general price indexes overestimate the competitiveness of the United States relative to Japan. High productivity growth in the traded sector of the Japanese economy results in a continuous fall in the prices of traded goods relative to...

Two explanations are given for why nominal or real returns differ across currencies: foreign exchange risk premia and systematic (rational) forecast errors. This study reexamines three parity conditions in international finance, uncovered interest parity, purchasing power parity, and real...

Many recent studies have documented the random behavior of real exchange rates. This paper shows that real exchange rates defined for different sectors of an economy move closely together with one another even though each of the sectoral real exchange rates taken alone has a large random...