TY  - JOUR
AU  - Grilli,Vittorio U.
AU  - Kaminsky,Graciela
TI  - Nominal Exchange Rate Regimes and the Real Exhange Rate, Evidence from  the U.S. and Britain, 1885-1986
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3067
PY  - 1989
Y2  - August 1989
UR  - http://www.nber.org/papers/w3067
L1  - http://www.nber.org/papers/w3067.pdf
N1  - Author contact info:
Vittorio U. Grilli
Ministero di Tesaro
Capo del Servizio T
via XX se tembre 97
Roma 00187 ITALY
Tel: 44/71/631-6407
E-Mail: Vittorio.grilli@tesoro.it

Graciela L. Kaminsky
Department of Economics
George Washington University
Washington, DC  20052
Tel: 202/994-6686
Fax: 202/994-6147
E-Mail: graciela@gwu.edu
AB  - Two propositions are common in the international finance literature: (1) the real exchange rate is a random walk, (2) the real exchange rate time series properties essentially depend on the nominal exchange rate regime. The first proposition has been used in support of the claim that PPP cannot even be considered a long run relationship since deviations from it are permanent in nature. The second proposition has been used as evidence of price stickiness. Contrary to the first proposition, this paper presents evidence that the random walk behavior of the real exchange rate is just a characteristic of the post-WWII period, while in the prewar period we observe the presence of transitory fluctuations. Also, although real exchange rate volatility appears to be different between fixed and flexible exchange rate regimes, these differences are not as systematic and large as the postwar data suggest.
ER  -