Intro -- Trade Costs and Real Exchange Rate Volatility: The Role of Ricardian Comparative Advantage -- Contents -- I. INTRODUCTION -- II. MULTI-COUNTRY MODEL -- III. EXAMPLE -- IV. EMPIRICAL EVIDENCE -- V. CONCLUSION -- APPENDIX MULTI-COUNTRY REAL EXCHANGE RATE VOLATILITY -- REFERENCES.

This paper examines the impact of trade costs on real exchange rate volatility. We incorporate a multi-country Ricardian model of trade, based on the work of Eaton and Kortum (2002), into a macroeconomic model to show how bilateral real exchange rate volatility depends on relative technological...