Accounting for persistence and volatility of good-level real exchange rates: The role of sticky information

• 成果类型: Article
• 署名作者: Crucini, Mario J.; Shintani, Mototsugu; Tsuruga, Takayuki
• 署名单位: Vanderbilt University; National Bureau of Economic Research; Kansai University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2010.01.003
• 发表日期: 2010
• 页码: 48-60
• 关键词: Good-level real exchange rates; Law of one price; sticky information; dynamic panel

摘要

Volatile and persistent real exchange rates are observed not only in aggregate series but also in micro-price data at the retail level. Kehoe and Midrigan (2007) recently showed that, under a standard assumption on nominal price stickiness, empirical frequencies of micro price adjustment cannot replicate the time series properties of the Law of One Price (LOP) deviations. We extend their sticky price model by combining good-specific price adjustment with information stickiness in the sense of Mankiw and Reis (2002). Our framework allows for multiple cities within a country. Using a panel of U.S.-Canadian city pairs, we estimate a dynamic price adjustment process for 165 individual goods. Under a reasonable assumption on the money growth process, we show that the model matches the persistence of the LOP deviation for the median good and accounts for the majority of its volatility when information updates occur every 12 months. (C) 2010 Elsevier B.V. All rights reserved.