NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Pricing to Market, Staggered Contracts, and Real Exchange Rate Persistence

Paul R. Bergin, Robert C. Feenstra

NBER Working Paper No. 7026
Issued in March 1999
NBER Program(s):   ITI

This paper offers an explanation for the persistence observed in real exchange rate movements. The model combines pricing to market behavior with sticky prices generated by staggered contracts. A translog preference structure is sued to enhance both features. The paper finds that openness limits the degree of endogenous persistence. Nevertheless, the model under reasonable parameter values can replicate the serial correlation of real exchange rate data. Further, significant exchange rate data. Further, significant exchange rate volatility can be generated, and this is amplified by the presence of endogenous persistence

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Document Object Identifier (DOI): 10.3386/w7026

Published: Bergin, Paul R. & Feenstra, Robert C., 2001. "Pricing-to-market, staggered contracts, and real exchange rate persistence," Journal of International Economics, Elsevier, vol. 54(2), pages 333-359, August. citation courtesy of

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