A growing body of empirical work has found evidence of a decline in exchange rate pass-through to import prices in a number of industrial countries. Our paper complements this work by examining pass-through from the other side of the transaction; that is, we assess the exchange rate sensitivity...

This paper documents the impact of U.S. monetary policy announcement surprises on foreign equity indexes, short- and long-term interest rates, and exchange rates in 49 countries. We use two proxies for monetary policy surprises: the surprise change to the current target federal funds rate...

This paper shows how economic interdependence affects wage indexation decisions when monetary authorities do not observe stochastic disturbances. Under a managed exchange rate, atomistic wage setters in interdependent nations will choose the same degree of indexation as they would in a small...

Exchange rates have raised the ire of economists for more than 20 years. The problem is that few, if any, exchange rate models are known to systematically beat a naive random walk in out of sample forecasts. Engel and West (2005) show that these failures can be explained by the standard-present...

This paper conducts a quantitative examination of the hypothesis that uncertain duration of currency pegs causes the sharp real appreciations and business cycles that affect chronically countries using fixed exchange rates as an instrument to stop high inflation. Numerical solutions of...

We analyze the factors driving the widely-noted persistence in asset return volatility using a unique dataset on global euro-dollar exchange rate trading. We propose a new simple empirical specification of volatility, based on the Kyle-model, which links volatility to the information flow,...

This paper builds a baseline two-country model of real and monetary transmission under optimal international price discrimination. Distributing traded goods to consumers requires nontradables; because of distributive trade, the price elasticity of export demand depends on the exchange rate....

International spillovers and exchange rate dynamics are examined in a two-country dynamic optimizing model that allows for idiosyncratic tastes across countries. Specifically, there is a home-good bias in consumption patterns: at given relative prices the ratio of home goods consumed to foreign...

The paper first surveys recent estimates of the appropriate yen dollar exchange rate that have been proposed in the literature. Most of the more careful estimates suggest that the yen was substantially undervalued against the dollar in early 1985 when it began its steep ascent and some of the...

This paper characterizes the statistical distribution of the response of the U.S. trade account to a dollar depreciation. To accomplish this task, the paper builds and estimates an econometric model of U.S. bilateral trade. Given an exchange-rate shock, this distribution is generated empirically...