In the Kehoe and Midrigan (2007) model, the persistence parameter of the real exchange rate is closely related to the measure of price stickiness in the Calvo-pricing model. When we employ this view, Rogo's (1996) 3 to 5 year consensus half-life implies that rms update their prices every 18 to...

We utilize the nonlinear unit root tests proposed by Park and Shintani (2005) and find strong evidence of nonlinear mean reversion between a US stock index and the stock indices in France, Germany, Italy and the UK. We identified an inaction band where deviations of these international stock...

It is well-known that there is a large degree of uncertainty around Rogoff's (1996) consensus half-life of the real exchange rate. To obtain a more efficient estimator, we develop a system method that combines the Taylor rule and a standard exchange rate model to estimate half-lives. Further, we...

This paper investigates the effects of the real exchange rate and income on US tourism export revenue and import spending with quarterly data for the floating exchange period from 1973 to 2010. Separate estimates of export revenue and import spending functions prove more revealing than estimates...

This paper revisits the empirical evidence of purchasing power parity under the current float by recursive mean adjustment (RMA) proposed by So and Shin (1999). We first report superior power of the RMA-based unit root test in finite samples relative to the conventional augmented Dickey–Fuller...

This paper studies optimal monetary policy responses to country-specific shocks in a simple two-country new open macroeconomic model that features sticky-price and local-currency pricing. Technology shocks in the home country are allowed to diffuse to the foreign country with a one-period lag,...

This paper investigates the stochastic nature of the unemployment rate allowing for cross-section dependence from a panel of US state-level data. We first employ the PANIC method to identify the common and idiosyncratic components. Powerful recursive mean adjustment (RMA) methods are used to...

We evaluate the usefulness of bias-correction methods for autoregressive (AR) models in enhancing the out-of-sample forecast accuracy. We employ two popular methods, proposed by Hansen (1999) and So and Shin (1999). Our Monte Carlo simulations show that these methods do not necessarily achieve...

Cheung et al. (2004) use a vector error correction model (VECM) for the current float nominal exchange rate and relative price data and claim that the sluggish purchasing power parity (PPP) reversion is primarily driven by the nominal exchange rate, not by relative price adjustment, which is at...

By analyzing the dynamic conditional correlations (DCC) of the daily stock returns of 10 emerging economies in comparison with those of the US for the period of 2006–2010, we find different patterns of crisis spillover among 10 emerging economies. While a group of countries has three...