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The degree of international risk sharing matters for how monetary policy should optimally be conducted in an open economy. This is because risk sharing affects the way in which monetary policy is affected by terms of trade considerations. In a standard two-country model with monopolistic...
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U.S. imports and exports respond little to exchange rate changes in the short run. Pricing behavior has long been thought central to explaining this response: if local prices do not respond to exchange rates, neither will trade flows. Sticky prices and strategic complementarities in price...
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markets can address the exchange rate volatility puzzle, the exchange rate persistence puzzle, the consumption real exchange …
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The relationship between exchange-rate volatility and aggregate export volumes for 12 industrial economies is examined … estimation period 1977:1-2003:4 using three measures of volatility. In contrast to recent studies employing panel data, we do not … find a single instance in which volatility has a negative and significant impact on trade …
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