TY  - JOUR
AU  - Giovannini,Alberto
AU  - Rotemberg,Julio J.
TI  - Exchange Rate Dynamics with Sticky Prices:  The Deutsch Mark, 1974-1982
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1281
PY  - 1989
Y2  - December 1989
UR  - http://www.nber.org/papers/w1281
L1  - http://www.nber.org/papers/w1281.pdf
N1  - Author contact info:
Alberto Giovannini
Unifortune Asset Management
Via Donizetti 53
20122 Milano, Italy
E-Mail: alberto.giovannini@alum.mit.edu

Julio J. Rotemberg
Graduate School of Business
Harvard University, Morgan Hall
Soldiers Field
Boston, MA  02163
Tel: 617/495-1015
Fax: 617/496-5994
E-Mail: jrotemberg@hbs.edu
AB  - This paper estimates simultaneously dynamic equations for the Deutsche Mark/Dollar exchange rate and the German wholesale price index, which emerge from a model in which German prices are sticky. This stickiness is due to price adjustment costs which take the form posited by Rotemberg(1982).The main results of the empirical analysis are two: First, the version of the model where prices are perfectly flexible is rejected. Second, real exchange rate variability is mostly accounted for by nominal exchange rate variability. We find substantial overshooting of the exchange rate to monetary innovations like those which appear to be typical in Germany.
ER  -