Empirical evidence suggests that a monetary shock induces the exchange rate to overshoot its long-run level. The estimated magnitude and timing of the overshooting, however, varies across studies. This paper generates delayed overshooting in a new Keynesian model of a small open economy by...

Since EMU represents a currency area with a GDP level and a world market share comparable to the United States, it is widely expected that the euro will become an important international currency. This paper suggests simple methods how to quantify the effects that EMU may exert on the roles of...

This paper re-examines the ability of sticky-price models to generate volatile and persistent real exchange rates. We use a DSGE framework with pricing-to-market akin to those in Chari, et al. (2002) and Steinsson (2008) to illustrate the link between real exchange rate dynamics and what the...

This paper develops a tractable two-country DSGE model with sticky prices à la Calvo (1983) and local-currency pricing. We analyze the capital investment decision in the presence of adjustment costs of two types, the capital adjustment cost (CAC) specification and the investment adjustment cost...